William Blair starts AAR at Outperform amid industry ‘supercycle’

William Blair analyst Louie DiPalma initiated coverage of AAR Corp. with an Outperform rating. AAR is the largest independent distributor of aircraft parts and the leading provider of recycled plane components in the $110B aviation aftermarket services industry, “which appears to be in a supercycle,” the analyst tells investors in a research note. The firm says robust travel demand and sustained quality issues at Boeing have resulted in older aircraft being forced to fly longer, which has led to elevated industry demand for aftermarket parts and services. This should continue to benefit AAR, which has expanded its distribution business over the past decade by 300%, says Blair. It sees share appreciation of greater than 20% based on the runway for margin expansion associated with the Triumph acquisition, more distribution contract wins, and Trax software momentum.