AAR's Q2 2025: Revenue Surge, EPS Miss; Strategic Initiatives Drive Growth

AAR Corp (NYSE: AIR), a leading provider of aviation services, reported its second quarter fiscal year 2025 earnings on January 7, 2025. The company's revenues beat expectations, while earnings per share (EPS) lagged. AAR's strong performance was driven by strategic initiatives, including the Product Support acquisition and the divestiture of the Landing Gear Overhaul business.

Revenue Surge

AAR's consolidated second quarter sales increased by 26% to $686.1 million, compared to $545.4 million in the same quarter last year. This growth was underpinned by a 12% acceleration in organic sales growth from 6% in the first quarter. The company's Parts Supply segment led the growth, with a 20% increase in sales, driven by a significant expansion in commercial new parts distribution activities and a return to growth in Used Serviceable Material (USM). The Repair & Engineering segment grew by 57% year-over-year, primarily due to the meaningful contributions from the Product Support acquisition and continued efficiency gains in heavy maintenance hangars (Source: AAR's Q2 2025 Earnings Release).



EPS Miss

Despite the strong revenue growth, AAR's adjusted EPS of $0.90 missed analysts' expectations. The company reported a net loss of $30.6 million, or $0.87 per share, compared to net income of $23.8 million, or $0.67 per diluted share, in the second quarter of the prior year. The earnings miss was primarily due to after-tax charges of $57.1 million associated with the recently announced FCPA settlement and related costs (Source: AAR's Q2 2025 Earnings Release).



Strategic Initiatives Drive Growth

AAR's strategic initiatives have significantly contributed to its financial performance:

1. Product Support Acquisition: The acquisition of the Product Support business contributed to the Repair & Engineering segment's 57% year-over-year sales growth in the second quarter of fiscal year 2025. This acquisition also helped AAR realize $10 million in cost synergies, which are expected to be fully achieved by fiscal Q1 FY26. These synergies will contribute to future margin expansion (Source: AAR's earnings release).
2. Divestiture of the Landing Gear Overhaul business: AAR announced an agreement to divest its Landing Gear Overhaul business for $51 million, which is expected to close in Q1 2025. This divestiture is part of AAR's strategy to optimize its portfolio and focus on higher margin businesses with more significant growth potential. The company expects the divestiture to be immediately accretive to margins and earnings upon closing (Source: AAR's earnings call).

These strategic initiatives have helped AAR achieve record top-line results, with sales of $686 million in Q2 2025, a 26% increase from the same quarter last year. Additionally, AAR reported a record adjusted EPS of $0.90, marking an 11% increase from the previous year. The company's double-digit sales growth across its commercial and government businesses has set it on track for another record year.

In conclusion, AAR's Q2 2025 earnings report demonstrated strong revenue growth driven by strategic initiatives, while EPS missed analysts' expectations due to FCPA-related charges. As AAR continues to optimize its portfolio and drive efficiencies, investors can expect the company to maintain its growth trajectory and improve margins in the coming quarters.