AAR Corp.

AAR reported fiscal Q1 2027 sales of $918 million, up 24% year over year including 11% organic growth. Adjusted diluted EPS was $1.49, up 38% year over year, and adjusted EBITDA margin expanded 100 basis points to 12.7%; excluding Legacy Commercial Programs, adjusted EBITDA margin was 13.3%. Adjusted cash from operations was a record $57 million, or 48% of adjusted EBITDA, and net leverage ended the quarter at 1.81x. Segment sales were Parts Supply $414.8 million (+31%), Repair, Engineering and Software $297.5 million (+31%), Government Solutions $138.8 million (+4%), and Legacy Commercial Programs included $24 million of rotable asset liquidations contributing about $5 million of margin. For Q2, AAR expects total sales growth excluding Legacy Commercial Programs of 14% to 16% and adjusted EBITDA margin excluding LCP of 13.0% to 13.4%. For full-year fiscal 2027, management raised sales growth outlook excluding LCP to the low teens. Both Q2 and full-year outlooks exclude MRO Holdings.

John Holmes framed the quarter as evidence that AAR’s strategy is working, pointing to above-market growth, margin expansion, and record cash flow. He said the MRO Holdings deal is a major step toward building the leading aviation aftermarket platform and emphasized the network effects across parts, repair, and software. His tone was upbeat and confident, with repeated emphasis that the combined business should create better margins, stronger cash flow, and more customer value.

Dylan Wolin focused on segment performance, margin drivers, and the funding plan. He highlighted Parts Supply sales of $414.8 million with a 15.3% adjusted EBITDA margin, Repair, Engineering and Software sales of $297.5 million with an 11.9% margin, and Government Solutions sales of $138.8 million with a 15.3% margin. He also said the PIPE tied to the MRO deal will close this week, adding 2.2 million shares to Q2 share count for about two-thirds of the quarter, and outlined closing leverage of about 3.6x with a path to around 3x within 24 months and back to the 2x to 2.5x target range over the medium term.

Analysts focused on the logic and integration of the MRO Holdings deal, margin implications, labor cost risk, turnaround times, and whether management bandwidth could handle another large acquisition after several recent deals. Holmes said the acquisition is mainly about network effects, cross-selling, and creating a one-stop-shop platform, while also expanding AAR’s global heavy maintenance reach into wide-body work and potentially European and Asian demand. On margin and labor, he said MRO Holdings’ labor cost advantage is longstanding and he does not see meaningful wage pressure that would impair margins. On the growth outlook, management said there is no sign of a slowdown in bookings or customer demand and that Q2 guidance actually implies higher organic growth than Q1.