AAR Corp. (NYSE: AIR) – Poised for Growth in the Aerospace Aftermarket
The aerospace industry presents a unique opportunity this year, especially for companies like AAR Corp., which specializes in aftermarket parts for commercial aircraft. As the industry wrestles with a significant backlog in airplane deliveries from giants like Boeing and Airbus, AAR is strategically positioned to benefit from increased demand for aircraft maintenance and parts.
Despite broader market challenges affecting airline stocks, the aerospace supplier side, including companies like AAR, is expected to see robust growth. With over $437 billion worth of backlogged orders at Boeing alone, equating to more than 5,400 airplanes, the demand for maintaining existing fleets is surging. This scenario is driving a strong aftermarket cycle, which AAR is well-equipped to capitalize on.
AAR has demonstrated resilience and potential for growth amid these industry dynamics. While the stock has only seen a modest increase of 1.3% this year, its role in the aerospace sector is increasingly critical. The company’s ability to generate significant free cash flow makes it a valuable asset, particularly in a period where efficient fleet utilization is more crucial than ever.
Industry Outlook and Investment Potential
As travel demand rebounds to near pre-pandemic levels and air cargo demand continues to rise, the long-term prospects for the aerospace sector appear promising. This recovery is supported by data from the International Air Transport Association (IATA), which highlighted that traffic in 2023 reached 94.1% of 2019 levels.
AAR specifically stands to benefit from these conditions. “It’s harder to get new planes now, with all the regulations and the issues Boeing has had, so older planes are flying longer and require more maintenance,” noted Nicholas Galluccio of Teton Advisors. This environment directly benefits AAR, which plays a crucial role in refurbishing and maintaining aging aircraft that remain in service longer than initially expected.
Market Position and Analyst Insights
AAR’s market position is reinforced by positive analyst sentiment, underlining its investment appeal. The stock is rated as a buy by the majority of analysts, reflecting confidence in its ongoing and future performance. With the current setup in the aerospace market, AAR Corp. represents a compelling opportunity for investors looking to benefit from the sector’s growth and the increasing need for comprehensive maintenance and parts solutions in commercial aviation.
