Darspal S Mann
Long/short equity, growth at reasonable price, special situations, deep value

AAR Corp: About To Hit A Rough Patch

AAR Corp. (NYSE:AIR) stock is trading close to all time high levels, while the guidance is being revised down, defense contracts are being delayed, cash flows are turning negative and earnings estimates may correct. Strategically, the company's "Jack of all, master of none" approach with a diverse set of services may work against growth, value addition opportunities and balance sheet improvements, in the coming months.

Recent weakness in MRO, Airlift and other businesses is more than short-term weather related. Macro trends are pointing towards slower fleet growth, tighter defense budgets and launch of new aircraft platforms. Competitively, AAR's balance sheet is not strong enough to take advantage of the consolidating airline industry or inorganic growth opportunities.

Stock,...

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