AAR 2025 Q4 Earnings Misses Targets with Net Income Decline

AAR (AIR) reported its fiscal 2025 Q4 earnings on Jul 22nd, 2025. AAR missed expectations with a significant decline in net income, overshadowing strong revenue growth. While the company reported a 14.9% increase in revenue to $754.50 million, net income fell drastically. AAR's guidance for Fiscal Year 2026 remains optimistic, projecting organic sales growth of up to 9% and adjusted operating margins improving from 9.6%. The company aims to reduce net leverage to 2.0 to 2.5 times by the end of FY2026, absent any material M&A activity.

Revenue

The total revenue of AAR increased by 14.9% to $754.50 million in 2025 Q4, up from $656.50 million in 2024 Q4.

Earnings/Net Income

AAR's EPS rose 269.4% to $0.94 in 2025 Q4 from $0.25 in 2024 Q4, marking continued earnings growth. Meanwhile, the company's profitability strengthened with net income of $34 million in 2025 Q4, marking 273.6% growth from $9.10 million in 2024 Q4. Despite the impressive EPS growth, the net income results reflect underlying challenges.

Post-Earnings Price Action Review

The strategy of buying AIR when revenues beat and holding for 30 days resulted in no return, with the strategy returning 0.00% and the benchmark returning 88.32%. The approach experienced no significant losses, as indicated by a maximum drawdown and Sharpe ratio both at 0.00%. However, the absence of returns relative to the benchmark highlights the strategy's ineffectiveness. Despite the lack of losses, the strategy’s flat performance suggests that it did not capitalize on the market's overall growth dynamics, underscoring the need for reassessment of investment tactics in response to earnings beats.

CEO Commentary

In Fiscal Year 2025, we delivered record sales and profitability, achieving a 14% organic sales growth in Q4. Our strategic initiatives, including the successful integration of the Product Support acquisition and divestiture of the Landing Gear business, have positioned us well for continued growth. We are executing on our objectives to improve margins through cost efficiencies and digital investments, with Trax software capturing significant new business. We anticipate additional opportunities for margin expansion and remain committed to reducing net leverage, which ended the year at 2.72x. Our strong financial foundation enables us to drive future growth and capitalize on market opportunities.

Guidance

For Fiscal Year 2026, we expect organic sales growth to approach 9% from the prior year, with adjusted operating margins improving from 9.6%. In Q1 FY2026, we anticipate sales growth of 6% to 11%, excluding the impact of the divested Landing Gear business, with adjusted operating margins projected between 9.6% and 10%. We aim to achieve a net leverage target of 2.0 to 2.5 times by the end of FY2026, absent any material M&A activity.

Additional News

In recent news, AAR Corp has made notable strides in expanding its digital capabilities and strategic partnerships. Trax, its aviation maintenance software subsidiary, announced the expansion of its agreement with JetBlue Airways to include an additional eMobility app and Trax’s cloud hosting solution, showcasing AAR's commitment to modernizing airline operations. Additionally, Cory Pereira from AAR was named to Wings Magazine's Top 20 Under 40, highlighting the company's leadership and innovation within the aerospace industry. Furthermore, AAR has been recognized for its corporate social responsibility efforts, with a branded classroom at the Aviation Institute of Maintenance Chicago, emphasizing AAR's dedication to community engagement and education in aviation.