3Q Earnings a Mixed Bag AIR
I torn AAR Corp,
wedding dresses for older brides. (NYSE: AIR) reported earnings Wednesday after the market closed and followed that up with their analyst conference call before the market opened today.
The reason I torn is because I honestly don know what to do with those results and AAR future prospects.
A part of me believes that the business is a lame duck,
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The other part of me believes, especially at current levels,
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ray-ban, and consumer air travel in particular, come roaring back,
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So why am I so baffled?
There many reasons, many of them chronicled within this post, that have led me to this place.
In this post I break down AAR full earnings release, as well as their analyst conference call, and round out my post with what you should do with AAR stock.
New to the AAR story? AAR Corp. provides products and services to the aviation,
michael kors shoes, aerospace, and defense industries worldwide.
It operates in four segments: Aviation Supply Chain; Maintenance, Repair, and Overhaul Structures and Systems; and Aircraft Sales and Leasing. military including specialized construction of mobile shelters and pallets, as well as support and products for various military aircraft and aircraft support, storage and maintenance functions.
Finally, through its Sales and Leasing segment, AAR buys,
abercrombie, sells and leases used aircraft for itself, on behalf of others, and through joint ventures. $366.2 million projected by analysts)Quarterly income from continuing operations of $20.0 million (flat from prior year)Quarterly earnings per share from continuing operations of $0.48 (up 2% from prior year/vs. Defense business now represents 44% up from 43% in Q2/09, up from 40% in Q1/09.
My Take: AAR tries to make a clear distinction between its sales this quarter compared to last quarter on an apples to apples basis.
In order to make that comparison however, AAR is stripping out results from its Aircraft Sales and Leasing segment, and then stating rather conveniently, that taking away those comparisons, AAR sales were essentially flat when compared to last year.
Let take this in 2 parts: 1) So,
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2) As investors, can we conveniently strip out one of AAR 4 business segments to gussy up the numbers?
Personally I don think so,
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There are no two ways about this: AAR sales have declined.
Business is slowing, airlines are not just cutting back on maintenance and overhaul procedures, but they are also decommissioning older aircraft at alarming rates, such that AAR services are being underutilized and might be for some time to come.
Further proof of this is the very fact that AAR in their press release stated that:
In response to market conditions, we have deemphasized our Aircraft Sales and Leasing business. We have not acquired any aircraft for lease since November 2007 and are committed to further reducing our investment in our aircraft portfolio.
Later on the company then states:
Consistent with our reduced emphasis on this business,
instyler.com, the Company is considering combining the activities of this segment with the Aviation Supply Chain segment beginning next fiscal year.
In other words, not only is AAR unable to sell or lease these older aircraft,
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We cannot simply results from AAR declining segment to make their overall numbers look better, because odds are,
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Bottom line: While the quarter was not as bad as analysts were obviously expecting, it wasn a good quarter either.
In addition,
www.juicycouture.com, once again, as they always do, AAR makes their profit numbers by pushing the pencil around and taking some debt off the books which allows them to claim a tax gain which shows up on the bottom line.
