Aerospace and defense products and services supplier, AAR Corp. AIR reported third-quarter fiscal 2015 earnings of 94 cents per share, surpassing the Zacks Consensus Estimate of 41 cents. Quarterly earnings shot up 135% year over year.
Including several impairment charges and costs, the company posted net loss of 89 cents per share in the reported quarter as against net income of 45 cents per share a year ago.
Shares of AAR Corp. fell 4.5% on Mar 30, 2015 following the earnings announcement.
Revenue
In the quarter under review, consolidated sales were $380.1 million, missing the Zacks Consensus Estimate of $508 million by 25.2%. On a year-over-year basis, revenues decreased 4.9% primarily due to lower contribution from its Expeditionary Services segment.
Segment Details
In the reported quarter, Aviation Services’ revenues of $318.4 million comprised 83.8% of the total revenue. Segmental revenues jumped 9.9% from the year-ago quarter on the back of improvement in new distribution programs.
The Expeditionary Services segment contributed 16.2% to quarterly revenues, corresponding to $61.7 million. An approximate 44% year-over-year decline was mainly due to lower airlift operations as a result of slower pace of replacement of flying positions.
Operational Highlights
In the third quarter, AAR Corp.’s cost of sales decreased 1.1% year over year to $330 million.
Despite reducing cost of sales, the company’s consolidated gross profit margin came in at 13.2%, down from 16.6% a year ago primarily due to disappointing performance at the Expeditionary Services segment.
Selling, general and administrative expenses increased 10.6% year over year to $41.7 million in the third quarter.
The company incurred interest expenses of $6.4 million in the reported quarter, down around 9.9% year over year.
Financial Update
AAR Corp.’s cash and cash equivalents as of Feb 28, 2015 came in at $67 million, down from $89.2 million as of May 31, 2014.
Net property, plant and equipment were $247.4 million as of Feb 28, 2015 versus $314.9 million at the end of fiscal 2014.
As of Feb 28, 2015, total debt was $643.3 million compared with $634 million as of May 31, 2014.
Cash used in operations in the third quarter stood at $22 million.
A Glance at its Peers
Triumph Group, Inc. TGI reported adjusted earnings from continuing operations for third-quarter fiscal 2015 ended Dec 31, 2014 of $1.42 per diluted share, missing the Zacks Consensus Estimate by 2.1%.
Zacks Rank
AAR Corp. has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Astronics Corporation ATRO and Rockwell Collins Inc. COL. Astronics sports a Zacks Rank #1 (Strong Buy), while Rockwell Collins carries a Zacks Rank #2 (Buy).
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