AAR CORP. (AIR) Stock Forecast & Price Target

AAR Corp is positioned for positive financial growth, largely due to anticipated improvements in margins driven by increased parts volume, particularly in its parts trading group. Key financial metrics indicate that adjusted operating margins are forecasted to rise to between 10.5% and 11.5%, supported by the higher margin Triumph Products acquisition and growing demand for USM and other services as the commercial aviation market continues to recover. Additionally, the distribution business within the Parts Supply segment has experienced a notable 26% increase, reflecting strong performance in both commercial and government distribution contracts, which enhances investor confidence in AAR’s revenue potential.

AAR Corp's organic growth has remained at the low end of the expected 5%-10% range, leading to negative sentiment surrounding the stock. The company's lower margins compared to commercial aftermarket peers, paired with the perception that the commercial Maintenance, Repair, and Overhaul (MRO) business is less appealing, contribute to its ongoing trading at a discount. Additionally, AAR's government business is viewed as a headwind—compounded by previous challenges in management execution and cost management, ultimately impacting overall profitability and investor confidence.