Shares of AAR (NYSE:AIR) have been up 10% on Friday after the aerospace upkeep and components supplier reported better-than-expected quarterly outcomes. The COVID-19 pandemic is taking its toll, however the firm’s general enterprise is holding up significantly better than Wall Street had feared.
On Thursday after markets closed AAR reported fiscal first-quarter earnings of $0.17 per share on income of $400.eight million, beating consensus expectations for a $0.05 per share loss on gross sales of $382 million.
The pandemic has crimped business aerospace gross sales as a result of with airways flying fewer planes, demand for spare components and upkeep providers has fallen. Total AAR gross sales fell 26% within the quarter 12 months over 12 months, with business income down 48%.
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However AAR generated greater than half of its enterprise within the quarter from authorities and protection clients, in comparison with 38% of complete income final 12 months, serving to the corporate to outperform expectations.
New enterprise wins in the course of the quarter embrace a three-year contract with the Royal Netherlands Air Drive to restore F-16 jet gasoline starters, in addition to offers with Frontier Airways and helicopter operator Air Strategies to supply guarantee and engineering providers.
AAR has additionally pushed to chop prices via the downturn, together with divesting its airlift and composites operations and consolidating its amenities footprint. Although its gross revenue margin did fall 300 foundation factors 12 months over 12 months to 12.1% as a result of decrease business volumes, CEO John M. Holmes on a post-earnings name with buyers stated he believes AAR is nicely positioned to thrive as soon as the pandemic is over.
“Whereas the timing of the restoration is unknown, we consider that the actions we now have taken and are persevering with to take to regulate our value construction and reposition our portfolio, mixed with the power of our crew, the airways’ want for decrease value options, and our steadiness sheet, uniquely place us to learn from an eventual return of demand and to emerge a good stronger and extra worthwhile firm,” Holmes stated.
Buyers went into earnings anticipating the worst, with AAR shares down greater than 50% 12 months to this point. As Holmes stated, the timing of an aerospace restoration is unsure, however AAR, if nothing else, made its case that the corporate shall be a survivor via the downturn.