AAR Corp. (AIR) raised its full-year out look earlier this month, which instantly sent shares higher. The news came on the heels of the company’s sixth consecutive earnings report.
Shares are up on the new, but thankfully so are estimates making this Zacks #1 Rank (Strong Buy) a solid value play.
Company Description
AAR Corp offers products and services for defense, government and aviation markets. Part of the business includes making, buying and selling new and used aircraft parts and components.
Another Earnings Surprise
On Sep 15 AAR reported first-quarter results for fiscal 2011 that showed a 21% year over year jump in sales, to $412 million. Much of that increase was due to a 45% spike in government and defense sales as well as a recent acquisition.
AAR reported net income of $13.7 million, $3.5 million more than the same period last year. Earnings per share was 35 cents, a nickel higher than the Zacks Consensus Estimate. The company has not topped estimates in the past 6 quarters.
The CEO added, “We are encouraged by our first quarter results and believe they reflect the early stages of recovery in demand for commercial aviation products and services. As the commercial market recovery continues to develop, we expect that our financial results will continue to improve.”
Estimates Jump
Analysts quickly raised full-year estimates following the report. The Zacks Consensus Estimate for this year is up 9 cents, to $1.49. Next year’s forecasts are up 12 cents on average, to $1.87.
If AAR hits these targets the annual growth rates will be 26% for each year.
You might expect to pay a premium for the top rated company in its industry, but shares of AIR are trading with attractive valuations. The Forward P/E is about 15 times, the price-to-book is only 1.1 and price-to-sales is only 0.6.
The Chart
Shares of AIR jumped earlier this month after the company raised it full-year outlook. Full year earnings are expected to land between $1.35 and $1.50.
Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service
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