AAR’s fleet-aging tailwinds, software moat, and balance-sheet simplification support attractive long-term upside despite near-term HAECO margin pressure.
Overview
AAR Corp. (AIR) is a global independent aviation aftermarket platform spanning parts distribution, MRO, government logistics, and proprietary maintenance software across more than 20 countries. Its realigned portfolio is approximately 45% Parts Supply, 30% Repair, Engineering, and Software, 20% Government Solutions, and 5% Legacy Commercial Programs, with commercial customers representing 73% of Q4 FY2026 revenue and government and defense customers 27%. **FY2026 delivered record financial performance:** sales rose 19.0% to $3.308 billion, adjusted EPS increased 29.2% to $5.05, adjusted EBITDA reached $401.1 million, and adjusted operating margin expanded to 10.2%. Q4 sales increased 23.0% to $928.0 million and adjusted diluted EPS rose 32.0% to $1.53, exceeding consensus. Management guides to Q1 FY2027 sales growth of 21% to 23% excluding Legacy Commercial Programs and 12.25% to 12.75% adjusted EBITDA margins, while its three-year framework targets 8% to 12% revenue CAGR, at least 13% EBITDA margin, and approximately 15% adjusted EPS CAGR. **The investment case rests on fleet-aging demand, HAECO integration, software expansion, and $160 million of LCP asset liquidation**, although near-term MRO margin pressure and leverage remain relevant risks.