William Blair initiated research coverage of AAR Corp. (AIR $57.14), a provider of supply chain and maintenance, repair, and overhaul (MRO) services for commercial aviation and government customers.

Analyst Louie DiPalma estimated that the company would generate revenue of $2.26 billion in 2024, an increase from $1.99 billion in 2023, and rising to a projected $2.47 billion in 2025.

“AAR is the largest independent distributor of aircraft parts and the leading provider of recycled plane components in the $110 billion aviation aftermarket services industry, which appears to be in a supercycle,” said DiPalma. “Robust travel demand and sustained quality issues at Boeing and RTX have resulted in older aircraft being forced to fly longer, which has led to elevated industry demand for aftermarket parts and services. This should continue to benefit AAR, which has expanded its distribution business over the past decade by 300% and leads the aviation industry in providing third-party distribution of OEM parts to the commercial aftermarket. The company has signed more than 30 exclusive distribution agreements with tier-1 OEMs that include TransDigm, Raytheon, and Woodward.

“The company’s recently acquired high-margin Trax aircraft maintenance software is in prime position to take market share from legacy ERP providers that today comprise nearly half of the $400 million MRO software market,” added DiPalma. “Airlines are upgrading their software and switching vendors as they migrate from on-premises to the cloud, and Trax is one of three leading vendors they are turning to. We expect Trax’s $30 million annual revenue to double over the next five years as it wins new software customers by cross-selling from its existing base.”

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