StandardAero (SARO): A Strategic Lock-Up Expiration and Revenue Boost Signal a Compelling Entry Point

Investors in StandardAero, Inc. (NYSE: SARO) are facing a pivotal moment as the June 24, 2025, lock-up expiration date approaches. Coupled with an upward revision in 2025 revenue guidance to $5.825 billion–$5.975 billion, this aerospace services leader is poised to benefit from reduced selling pressure and renewed operational confidence. While the recent secondary offering introduced dilution, the company's dominant market position, recurring revenue streams, and strategic focus on high-margin aftermarket services make this a compelling entry point for investors.

Lock-Up Expiration: A Catalyst for Stability

The June 24 lock-up expiration marks the end of restrictions on major shareholders, including affiliates of The Carlyle Group and GIC, who sold 30 million shares in a secondary offering priced at $28.00 in late May. While this offering increased shares outstanding by ~9.7%, the lock-up expiration removes the overhang of potential mass sell-offs, which often depress stock prices. Historically, lock-up expirations can create volatility, but StandardAero's strong fundamentals and the underwriters' role in stabilizing the offering suggest this expiration could instead signal investor confidence.

Dilution Impact: Manageable Within a Strong Growth Narrative

The secondary offering, while dilutive, did not involve new shares from StandardAero itself. As of Q1 2025, the company reported $1.4 billion in revenue (up 16% YoY) and $63 million in net income, a stark improvement from $3 million in Q1 2024. Analysts note that dilution is offset by StandardAero's $10 billion market cap and its robust EBITDA growth (20% YoY to $198 million). The company's focus on debt reduction—from $3.3 billion in 2024 to $2.2 billion—also bolsters its financial flexibility.

Revenue Guidance: A Vote of Confidence

The upward revision of 2025 revenue guidance to $5.825B–$5.975B (from earlier estimates) underscores management's optimism. This reflects strong demand across its diversified end markets:
- Commercial Aviation: A 6.2% CAGR through 2030 in aftermarket services, driven by rising air travel and engine maintenance needs.
- Military Aviation: Multiyear contracts for engine overhauls, including platforms like the CFM LEAP engine, where StandardAero holds a 20% market share.
- Business Aviation: Recurring revenue from high-net-worth clients reliant on timely engine servicing.

Why StandardAero Stands Out

1. Dominant Market Position: As a leader in engine maintenance, repair, and overhaul (MRO), StandardAero benefits from long-term service agreements with airlines and defense clients.
2. High Recurring Revenue: Over 70% of revenue comes from predictable MRO contracts, reducing reliance on volatile new equipment sales.
3. Strategic Investments: Expansions in LEAP engine capacity and workforce training position the company to capitalize on the LEAP's growing dominance in commercial aviation.

Investment Thesis: A Resilient Play on Aerospace Recovery

The confluence of the lock-up expiration, revised guidance, and strong financials creates a high-risk, high-reward opportunity for investors with a 3–5 year horizon. Key catalysts to watch:
- Post-Lock-Up Trading: Monitor if the stock stabilizes above $28.66 (its May 23 post-offering close) as institutional investors absorb the float.
- Margin Expansion: Analysts like UBS ($30 price target) and bullish peers ($39) highlight StandardAero's ability to leverage scale and operational improvements.
- LEAP Engine Growth: The CFM LEAP, powering 75% of new single-aisle aircraft, will drive demand for MRO services as engines age.

Risks to Consider

• Economic Downturns: Reduced air travel could slow MRO demand.
• Supply Chain Delays: Component shortages could disrupt overhaul timelines.
• Competitor Pricing Pressure: Intense competition in aftermarket services could compress margins.

Final Take: A Buy at Current Levels

StandardAero's $28.00 offering price and current valuation (P/E 765.59, EV/EBITDA 20.09) may seem elevated, but they reflect its long-term growth trajectory. With the lock-up expiration and upward guidance, now is an ideal time to accumulate shares below $30, especially if underwriters stabilize the stock post-expiration. For investors seeking exposure to the resilient aerospace aftermarket sector, SARO offers a high-conviction opportunity to capitalize on both near-term stability and long-term industry tailwinds.

Action Item: Use dips below $28.50 as entry points, with a target of $35+ by late 2025. The lock-up expiration on June 24 is the first test—hold for the long game.