Aerospace and defense products and services supplier, AAR Corp. AIR reported second-quarter fiscal 2016 (ended Nov 30, 2015) earnings of 30 cents per share, in line with the Zacks Consensus Estimate. Quarterly earnings, however, declined 14.3% from the year-ago level of 35 cents, hurt by the poorly performing Expeditionary Services segment.
Revenues
In the quarter under review, consolidated sales were $423.8 million, beating the Zacks Consensus Estimate of $396 million by 7%. On a year-over-year basis, revenues increased 5.1% primarily due to higher contribution from its Aviation Services segment.
Segment Details
In the reported quarter, Aviation Services’ revenues of $359.6 million contributed approximately 85% to the total revenue. Segmental revenues increased 10.6% from the year-ago quarter on the back of an industry-leading supply chain and MRO service platforms deliveries.
The Expeditionary Services segment contributed the balance 15% to quarterly revenues, corresponding to $64.2 million, down 17.1% year over year.
Operational Highlights
In the fiscal second quarter, AAR Corp.’s cost of sales increased 8.3% year over year to $363.9 million.
Selling, general and administrative expenses increased 6% year over year to $42.5 million.
The company incurred interest expense of $1.5 million in the reported quarter versus $6.6 million a year-ago.
Financial Update
AAR Corp.’s cash and cash equivalents, as of Nov 30, 2015, were $62.8 million, down from $54.7 million as of May 31, 2015.
Net property, plant and equipment were $205.1 million, as of Nov 30, 2015, compared with $214.8 million as of May 31, 2015.
As of Nov 30, 2015, total debt increased to $170.3 million from $154 million as of May 31, 2015.
At the end of the second quarter, the company’s net debt-to-capital ratio stood at 11% and it has approximately $450 million of available liquidity.
Dividend, Repurchase and Investment
In the second quarter of fiscal 2016, the company paid dividends worth $2.6 million and repurchased about 142,000 shares worth $2.8 million in the reported quarter. Since Mar 2015, AAR Corp. has returned about $167 million to shareholders through dividends and share repurchases.
Zacks Rank
AAR Corp. has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include TransDigm Group Incorporated TDG, Orbital ATK, Inc. OA and Raytheon Co. RTN. While TransDigm Group sports a Zacks Rank #1 (Strong Buy), Orbital ATK and Raytheon hold a Zacks Rank #2 (Buy).
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