AAR Corp. Prices Public Offering of Common Stock, Shares Decline

AAR Corp. Initiates Public Stock Offering Amidst Strong Performance

AAR Corp. (NYSE: AIR), a leading provider of aviation services to commercial and government operators, announced the pricing of an underwritten public offering of 3,000,000 shares of its common stock at $83.00 per share. This strategic capital raise aims to generate approximately $239.0 million in net proceeds for the company. Following the announcement, the company's stock experienced a 6.66% decrease in pre-market trading, reflecting typical investor reactions to potential share dilution. The shares are anticipated to be delivered around October 2, 2025, subject to customary closing conditions.

Offering Details and Financial Strategy

The offering includes a 30-day option for the underwriters to purchase up to an additional 450,000 shares at the public offering price, which, if fully exercised, could increase the total net proceeds to approximately $274.9 million. The primary use of these funds is earmarked for the repayment of outstanding borrowings under AAR’s unsecured revolving credit facility. Remaining proceeds are designated for general corporate purposes, which may include funding future acquisitions. This strategic move is intended to bolster the company's balance sheet and provide enhanced financial flexibility for future growth initiatives.

Joint lead book-running managers for the offering include Goldman Sachs & Co. LLC, Jefferies, and RBC Capital Markets. Additional joint book-running managers are BofA Securities, Inc., Truist Securities, Inc., and Wells Fargo Securities, LLC. Co-managers for the offering comprise The Benchmark Company, LLC, CIBC Capital Markets, KeyBanc Capital Markets Inc., PNC Capital Markets LLC, Samuel A. Ramirez & Company, Inc., and William Blair & Company, L.L.C. The offering is being made pursuant to a shelf registration statement on Form S-3 that was filed with the Securities and Exchange Commission (SEC) and became automatically effective on July 19, 2023.

Market Response and Dilution Considerations

The 6.66% decline in AAR’s stock price to $84.75 before the bell, from its last sale price, is a common market reaction to equity offerings. Such offerings increase the number of outstanding shares, leading to potential dilution for existing shareholders. This offering price represents a 7.4% discount to the stock’s last sale on Tuesday. Prior to this announcement, AIR shares had shown robust performance, having risen for seven consecutive days and achieving a new record high close, extending its year-to-date gain to 46%. The stock had been trading near its 52-week high of $89.69, delivering a 62% return over the past six months.

Broader Context: Financial Health and Growth Initiatives

AAR Corp., headquartered in the Chicago area, operates as a global aerospace and defense aftermarket solutions company. The company maintains a strong financial position with a market capitalization of approximately $3.1 billion. Key financial indicators include a P/E ratio of 110.58, a manageable debt-to-equity ratio between 0.82 and 0.86, and a robust current ratio of 2.91, indicating strong liquidity. The company's Return on Equity (ROE) stands at 12.29%, outperforming the industry average of 9.31%.

This capital raise follows a period of strategic expansion for AAR. The company recently acquired American Distributors Holding Co., LLC for $146 million in an all-cash transaction to expand its parts distribution business, integrating it into its Parts Supply segment. Furthermore, AAR is expanding its airframe MRO facilities in Oklahoma City and Miami, projects that are projected to increase MRO network capacity by 15% and add nearly $60 million to annual revenues upon completion next year.

For the first quarter of fiscal year 2026, reported on September 23, 2025, AAR exceeded analyst expectations. Adjusted EPS reached $1.08, surpassing estimates of $1.00, and revenue reached $740 million, exceeding projections of $691.5 million. The Parts Supply segment notably grew by 27%, and the adjusted operating margin improved from 9.1% to 9.7%.

Analyst Perspectives and Future Outlook

Despite the short-term negative reaction to the stock offering, analyst sentiment towards AAR remains largely positive. All six analysts covering the stock are reportedly bullish, with a median price target of $87.50, according to LSEG data. Recent analyst updates include KeyBanc raising its price target from $86 to $93 with an "Overweight" rating, and Truist Securities increasing its target from $81 to $90 with a "Buy" rating. RBC Capital reiterated an "Outperform" rating with an $85 price target.

The company forecasts Q2 FY2026 revenue growth between 7% and 10% and aims for a 9.6%-10% adjusted operating margin. Investors will be closely monitoring the effective utilization of the offering's proceeds for debt reduction and strategic acquisitions, as these actions are central to AAR’s long-term financial health and growth trajectory. The market's focus will now shift to how well AAR executes on its stated objectives, balancing the immediate impact of dilution with the potential for enhanced future value.