AAR’s new commercial distribution role with Woodward

AAR (AIR) has signed a multi year commercial distribution agreement with Woodward, making AAR the preferred distributor of high demand consumable engine parts for airlines using CFM LEAP, GEnx, and CF34 engines.

AAR’s share price return has been strong, with a year to date gain of 32.5% and a 1 year total shareholder return of 90.37%. This suggests momentum has been building around the stock as the Woodward agreement and other developments shape expectations.

If this aviation deal has your attention, it could be a good moment to broaden your watchlist and check out 35 robotics and automation stocks

With AIR up 90.37% over the past year and trading at $111.90 against an average analyst price target of $131, the key question is whether there is still a buying opportunity here or if the market is already pricing in future growth.

Most Popular Narrative: 15% Undervalued

AAR’s most followed narrative pegs fair value at $131 per share, which sits above the last close at $111.90 and frames the current analyst debate.

The commercialization of additional MRO capacity in Oklahoma City and Miami, both already sold out before opening, positions AAR to capitalize on the expected long-term rise in global air travel and the need for ongoing maintenance of aging aircraft fleets, supporting robust revenue growth and improved earnings visibility. AAR's strong growth in new parts Distribution directly aligns with increasing demand for resilient supply chains and more diversified inventory management from both commercial and government customers, indicating sustained future revenue expansion and potential for higher margins.

Curious what is baked into that $131 figure? The narrative leans on firm top line assumptions, thicker margins, and a richer future earnings multiple than today.

Result: Fair Value of $131 (UNDERVALUED)

However, this hinges on commercial aviation holding up and AAR executing on its digital plans, with OEM competition a clear threat to margins if those pieces misfire.

Another View: DCF Paints a Different Picture

The SWS DCF model points in the opposite direction, with an estimated future cash flow value of $56.43 per share versus the current $111.90 price, which screens as overvalued rather than undervalued. That is a wide gap. Which lens do you trust more: cash flows or earnings multiples?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out AAR for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With mixed signals around value, sentiment and future outcomes, it can be helpful to review the data directly and form your own view based on the 4 key rewards and 1 important warning sign.

Ready to uncover more investment ideas?

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• Target potential mispricings by scanning 51 high quality undervalued stocks that combine quality fundamentals with market expectations that may not fully reflect them yet.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.