AAR Corp share price loses a sixth of its value on poor outlook – Suppliers Share Wrap

AAR Corp announced its fourth quarter results will be below prior expectations, due to a slower than expected recovery in demand for commercial aviation after-market support. Investors wiped 17.2% off the value of the company’s shares, which closed at a nine-month low.

The company expects fourth quarter sales to be USD355-365 million, with diluted earnings per share of USD0.25-0.30. The company’s Chairman and CEO, David P Storch, noted that while AAR Corp has seen signs of recovery in some of its businesses that support commercial aviation, a “more meaningful” pick-up in its parts business has not yet materialised.

The company had expected additional strength in its commercial parts supply businesses in its fourth quarter to more than offset an expected decline in volumes and margins at its mobility products business.

The company also expects an impact on earnings per share of USD0.02, related to the acquisition of Aviation Worldwide Services. AAR Corp completed the acquisition in Apr-2010 for approximately USD200 million. The company was purchased from military services contractor Xe Services (formerly known as Blackwater Worldwide).

AerCap gains

Another major mover yesterday was AerCap, which gained 4.4%. The company announced the formation a JV with Avolon, a new a Dublin-based aircraft leasing company. It has also signed an agreement with Avalon for the sale of six A320s.

According to Klaus Heinemann, CEO of AerCap, investor demand for new aircraft has significantly increased over the last few months, especially when linked to long-term leases with prime airlines.

Selected Aviation suppliers’ daily share price movements (% change): 25-May-2010