AAR Corp
AIR
$102.24
-0.26%
AAR Corp. is a diversified provider of aviation services and products, operating through segments including Parts Supply, Repair, Engineering and Software, Government Solutions, and Legacy Commercial Programs, serving commercial fleet operators, OEMs, and government/military customers globally. The company is a recognized leader in the commercial aerospace aftermarket, particularly in used serviceable material (USM) and parts distribution, with a growing presence in government defense logistics and software solutions. The current investor narrative centers on AAR's strong revenue growth—Q1 FY2027 revenue rose 24.1% year-over-year to $918 million—driven by robust demand for aftermarket parts and repair services amid a global aviation recovery. However, recent margin compression and a sharp stock price pullback have raised questions about whether the company can sustain its growth trajectory while managing cost pressures and integration of recent acquisitions.…
AIR
AAR Corp
$102.24
Investment Opinion: Should I buy AIR Today?
Based on the synthesis, AIR is rated a Hold. The core thesis is that the company's strong revenue growth and discounted forward valuation are offset by margin compression and recent negative price momentum, creating an uncertain near-term outlook. The analyst consensus is Buy with an average target of $154.50, implying significant upside, but the recent downgrade and wide target range suggest caution.
Supporting evidence includes: 1) Revenue growth of 24.1% YoY in Q1 FY2027, 2) Forward PE of 15.31x, below the sector average of ~20x, 3) PS ratio of 1.27x, near historical lows, 4) Free cash flow of $161.5 million TTM, and 5) Implied upside of 50.7% to analyst average target. However, net margin has declined to 4.37% from 8.05% in Q3 FY2026, and the stock has underperformed the S&P 500 by 30.2% over three months.
The biggest risks are margin compression, integration challenges, and competitive pressures. The rating would upgrade to Buy if margins stabilize (e.g., net margin rebounds above 5%) and revenue growth remains above 20%, or if the stock price declines further to provide a better entry point. It would downgrade to Sell if revenue growth decelerates below 15% or if margins continue to deteriorate. Currently, the stock appears fairly valued on trailing earnings but undervalued on forward earnings, assuming the company meets estimates.
Sign up to view all
AIR 12-Month Price Forecast
The outlook is balanced with a neutral stance. The company's strong revenue growth and discounted forward valuation are attractive, but margin compression and negative price momentum create uncertainty. The base case (50% probability) sees the stock trading between $120 and $140 as the market awaits margin stabilization. Upgrades would occur if margins recover and growth sustains; downgrades if margin pressure continues or growth slows.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on AAR Corp's 12-month outlook, with a consensus price target around $154.50 and implied upside of +51.1% versus the current price.
Average Target
$154.50
0 analysts
Implied Upside
+51.1%
vs. current price
Analyst Count
—
covering this stock
Price Range
$145 - $168
Analyst target range
Four analysts cover AAR Corp., with a consensus recommendation of 'Buy' (mean rating 1.71 on a scale where 1 is Strong Buy). The average target price is $154.50, implying a 50.7% upside from the current price of $102.51. The consensus leans bullish, with all four analysts maintaining positive ratings (Buy or Outperform) as of the latest updates in September 2026. This suggests that despite the recent stock decline, analysts see significant value in the shares.
The target price range is wide, from a low of $145.00 to a high of $168.00, indicating high uncertainty. The high target of $168.00 assumes a successful execution of growth initiatives, margin expansion, and possibly multiple expansion, while the low target of $145.00 still represents a 41.4% upside but may price in slower growth or margin pressures. Recent institutional ratings show a mix of reiterations: Jefferies and RBC Capital maintained Buy/Outperform in late September 2026, while Keybanc downgraded to Sector Weight from Overweight in June 2026, reflecting some caution. The wide spread and recent downgrade suggest that while analysts are generally positive, there is no strong consensus on the near-term trajectory, and the stock may remain volatile.
Drowning in data?
Find the real signal!
Bulls vs Bears: AIR Investment Factors
The bull case rests on strong revenue growth, a discounted forward valuation, and bullish analyst targets, while the bear case highlights margin compression, recent stock weakness, and execution risks. The evidence is balanced, but the bear side currently has stronger near-term momentum, given the sharp price decline and margin deterioration. The most critical tension is whether AAR can stabilize margins while sustaining its 24% revenue growth; if margins recover, the stock could re-rate toward analyst targets, but if margin pressure persists, further downside is likely.
Bullish
- Strong revenue growth: Q1 FY2027 revenue rose 24.1% YoY to $918 million, continuing a streak of double-digit growth (Q4 FY2026 +23.0%, Q3 FY2026 +24.6%). This reflects robust demand for aftermarket parts and government solutions.
- Analyst consensus bullish: All 4 analysts rate AIR a Buy with an average target of $154.50, implying 50.7% upside from the current price of $102.51. The low target of $145 still offers 41.4% upside.
- Attractive forward valuation: Forward PE of 15.31x is well below the sector average of ~20x, and PS ratio of 1.27x is near the low end of its historical range (typically 3-5x). This suggests the market is pricing in pessimism.
- Solid balance sheet and cash flow: Debt-to-equity is moderate at 0.584, current ratio is strong at 2.84, and trailing free cash flow is $161.5 million. This provides flexibility for growth investments and acquisitions.
Bearish
- Margin compression: Net margin fell to 4.37% in Q1 FY2027 from 5.46% in Q4 FY2026 and 8.05% in Q3 FY2026. Operating margin also declined to 7.85% from 8.13% sequentially, indicating rising costs.
- Recent sharp stock decline: The stock is down 17.2% in the past month and 26.8% in three months, significantly underperforming the S&P 500 (relative strength -17.8% and -30.2%, respectively). This reflects deteriorating sentiment.
- High trailing valuation: Trailing PE of 22.54x is in line with the sector but elevated relative to the company's own history (range 15-32x). The forward PE of 15.31x relies on optimistic EPS growth that may not materialize.
- Integration and execution risks: Recent acquisitions have increased debt and may be causing cost pressures. The company's ability to integrate and achieve synergies is uncertain, as evidenced by margin volatility.
AIR Technical Analysis
AAR Corp. is in a broad uptrend over the past year, with a 22.1% gain, but the stock has recently pulled back sharply from its 52-week high of $154.00. At the current price of $102.51, it sits at approximately 36.7% of its 52-week range (calculated as ($102.51 - $76.10) / ($154.00 - $76.10)), indicating a significant correction from highs and now trading closer to the lower end of its annual range. This positioning suggests the stock is in a corrective phase, potentially offering value if fundamentals remain intact, but also reflecting heightened selling pressure.
Short-term momentum has deteriorated markedly: the stock is down 17.2% over the past month and 26.8% over the past three months, contrasting with the 22.1% one-year gain. This divergence signals a potential trend reversal or at least a deep pullback, as the recent decline has erased a substantial portion of earlier gains. The relative strength versus the S&P 500 over the past month is -17.8%, underscoring significant underperformance. Volume data is not available for detailed analysis, but the magnitude of the decline suggests distribution.
Key technical levels are defined by the 52-week low of $76.10 as support and the 52-week high of $154.00 as resistance. A breakdown below $76.10 would signal a bearish continuation, while a breakout above $154.00 would require a strong catalyst to overcome the recent downtrend. The stock's beta of 1.109 indicates it is slightly more volatile than the market, meaning investors should expect amplified moves relative to the S&P 500, which is important for position sizing and risk management.
Beta
1.13
1.13x market volatility
Max Drawdown
-35.0%
Largest decline past year
52-Week Range
$76-$154
Price range past year
Annual Return
+25.0%
Cumulative gain past year
| Period | AIR Return | S&P 500 |
|---|---|---|
| 1m | -19.2% | +0.6% |
| 3m | -25.2% | +3.6% |
| 6m | -15.4% | +14.6% |
| 1y | +25.0% | +15.8% |
| ytd | +21.1% | +13.6% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
AIR Fundamental Analysis
AAR Corp. has demonstrated robust revenue growth, with Q1 FY2027 (ending August 31, 2026) revenue of $918 million, up 24.1% year-over-year from $739.6 million in Q1 FY2026. This follows a trend of accelerating growth: Q4 FY2026 revenue was $928 million (up 23.0% YoY), Q3 FY2026 was $845.1 million (up 24.6% YoY), and Q2 FY2026 was $795.3 million (up 15.9% YoY). The Parts Supply segment, which includes new parts distribution and USM, is the largest revenue contributor, and the overall growth is driven by strong aftermarket demand and government solutions. The consistent double-digit growth suggests a healthy demand environment, but the recent stock decline may reflect concerns about sustainability or margin pressures.
Profitability remains solid but with some margin pressure. In Q1 FY2027, net income was $40.1 million, with a net margin of 4.37%, down from 5.46% in Q4 FY2026 and 8.05% in Q3 FY2026. Gross margin was 19.2% in Q1 FY2027, relatively stable compared to 19.0% in Q4 FY2026 and 18.3% in Q3 FY2026. The operating margin was 7.85% in Q1 FY2027, lower than 8.13% in Q4 FY2026 and 7.62% in Q3 FY2026. The decline in net margin despite revenue growth indicates rising costs, possibly from integration of acquisitions or higher SG&A. Compared to industry peers, AAR's margins are thin but typical for aerospace aftermarket distributors, and the company remains profitable.
The balance sheet shows a debt-to-equity ratio of 0.584, which is moderate and manageable, and a current ratio of 2.84, indicating strong liquidity. Free cash flow for the trailing twelve months was $161.5 million, and in Q1 FY2027, operating cash flow was $55.8 million with free cash flow of $55.8 million (capex of $11.8 million). ROE is 11.0%, and ROA is 5.6%, reflecting efficient use of capital. The company generates sufficient cash to fund operations and growth, reducing reliance on external financing, though the debt level warrants monitoring given the recent acquisition activity.
Quarterly Revenue
$918000000.0B
2026-08
Revenue YoY Growth
+24.1%
YoY Comparison
Gross Margin
19.2%
Latest Quarter
Free Cash Flow
$161500000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
Open an Account, get $2 TSLA now!
Valuation Analysis: Is AIR Overvalued?
Since AAR Corp. reported positive net income (Q1 FY2027 net income of $40.1 million), the PE ratio is the primary valuation metric. The trailing PE is 22.54x, while the forward PE is 15.31x, implying the market expects significant earnings growth (forward EPS estimate of $9.05 vs. trailing EPS of $0.0446, though the trailing EPS appears distorted by one-time items or share count changes). The large gap between trailing and forward PE suggests the market is pricing in a substantial earnings recovery or growth, which may be optimistic given recent margin pressures.
Compared to the industry average, AAR's valuation appears mixed. The PS ratio is 1.27x, and EV/Sales is 1.39x, which are relatively low for the aerospace & defense sector, where peers often trade at 2-3x sales. The forward PE of 15.31x is also below the sector average of around 20x, suggesting a discount. However, the trailing PE of 22.54x is in line with the sector. The discount on forward earnings may reflect skepticism about the company's ability to meet growth expectations, especially after the recent stock decline.
Historically, AAR's PE ratio has ranged from 15x to 32x over the past few years, with the current trailing PE of 22.54x near the middle of that range. The PS ratio of 1.27x is near the low end of its historical range (typically 3-5x), which could indicate a value opportunity if the company can sustain growth. However, the recent price decline and margin compression suggest the market is pricing in slower growth or higher risk, and the low PS ratio may reflect fundamental deterioration rather than a bargain.
PE
22.5x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 14x~32x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
14.8x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are significant. The company's net margin has compressed to 4.37% in Q1 FY2027 from 8.05% in Q3 FY2026, despite revenue growth, indicating rising costs or integration challenges. Debt-to-equity of 0.584 is manageable but has increased due to acquisitions, and interest expense of $16.2 million in Q1 FY2027 consumes a notable portion of operating income. Additionally, revenue is concentrated in the Parts Supply segment and North America, exposing the company to regional economic downturns and supply chain disruptions.
Market and competitive risks are also present. The stock's beta of 1.109 means it is slightly more volatile than the market, so investors should expect amplified moves. The aerospace aftermarket is highly competitive, with peers like Heico and TransDigm potentially pressuring pricing and margins. Furthermore, the recent 26.8% three-month decline and 17.2% one-month decline suggest distribution and negative sentiment, which could continue if the company fails to meet growth expectations. Regulatory risks, such as changes in defense spending or aviation regulations, could also impact government solutions revenue.
The worst-case scenario would involve a continued decline in margins, loss of key contracts, and a broader market downturn. The stock could fall to its 52-week low of $76.10, representing a 25.8% decline from the current price of $102.51. If analyst bear-case targets are considered, the low target of $145 is actually above the current price, but that reflects optimism; a more realistic bear case might see the stock retest the low if earnings disappoint. From the current price, a drop to $76.10 would mean a loss of approximately 25.8%, and if the stock breaks below that support, further downside could occur.
FAQ
The key risks include: 1) Financial risk: net margin compression to 4.37% in Q1 FY2027 from 8.05% in Q3 FY2026, which could continue if cost pressures persist. 2) Competitive risk: intense competition in the aerospace aftermarket could pressure pricing and market share. 3) Macro risk: a recession could reduce aviation demand, impacting revenue; beta of 1.109 means the stock is more volatile than the market. 4) Company-specific risk: integration of recent acquisitions may not yield expected synergies, and the wide analyst target range ($145-$168) indicates uncertainty. The most severe risk is a margin collapse leading to earnings misses and a stock decline toward the 52-week low of $76.10.
The 12-month forecast has three scenarios: Bull case (30% probability) targets $154.50-$168.00, assuming margin recovery and sustained 20%+ revenue growth. Base case (50% probability) targets $120-$140, assuming moderate growth and stable margins. Bear case (20% probability) targets $76.10-$100, assuming margin deterioration and slowing growth. The base case is most likely, with the key assumption that net margin stabilizes around 4.5-5% and revenue growth remains above 15%. Analyst average target is $154.50, but the wide range reflects high uncertainty.
AIR appears undervalued on forward earnings but fairly valued on trailing metrics. The forward PE of 15.31x is below the aerospace & defense sector average of ~20x, and the PS ratio of 1.27x is near the low end of its historical range (typically 3-5x). However, the trailing PE of 22.54x is in line with the sector, and the market may be pricing in slower growth or higher risk due to recent margin compression. The low PS ratio could indicate a value opportunity if the company can sustain its 24% revenue growth, but it also reflects skepticism about future profitability.
AIR presents a mixed risk/reward profile. The stock trades at $102.51, with analysts' average target of $154.50 implying 50.7% upside, and a forward PE of 15.31x below the sector average. However, the company's net margin has compressed to 4.37% from 8.05% in Q3 FY2026, and the stock has fallen 26.8% over three months, underperforming the S&P 500 by 30.2%. For risk-tolerant investors, the potential upside may justify a small position, but conservative investors should wait for margin stabilization. The biggest downside risk is a retest of the 52-week low at $76.10, representing a 25.8% decline.
AIR is more suitable for medium-to-long-term investment (at least 1-2 years) given its growth stage and volatility. The company does not pay dividends, so returns depend on capital appreciation. Beta of 1.109 indicates slightly higher volatility than the market, making it less ideal for short-term trading unless one can tolerate swings. Earnings visibility is moderate, with analysts estimating EPS of $9.05 for the next fiscal year, but recent margin pressure adds uncertainty. A minimum holding period of 12-18 months is suggested to allow for margin recovery and integration benefits to materialize.
