A strong stock as of late has been AAR (AIR). Shares have been marching higher, with the stock up 12.1% over the past month. The stock hit a new 52-week high of $118.81 in the previous session. AAR has gained 42.8% since the start of the year compared to the 12.8% gain for the Zacks Aerospace sector and the 12.6% return for the Zacks Aerospace - Defense Equipment industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on January 6, 2026, AAR reported EPS of $1.18 versus consensus estimate of $1.02.
For the current fiscal year, AAR is expected to post earnings of $4.85 per share on $3.2 in revenues. This represents a 24.04% change in EPS on a 15.23% change in revenues. For the next fiscal year, the company is expected to earn $5.61 per share on $3.44 in revenues. This represents a year-over-year change of 15.67% and 7.42%, respectively.
Valuation Metrics
Though AAR has recently hit a 52-week high, what is next for AAR? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
AAR has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 24.4X current fiscal year EPS estimates, which is not in-line with the peer industry average of 37.4X. On a trailing cash flow basis, the stock currently trades at 21.6X versus its peer group's average of 36X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this is even more important than the company's VGM Score. Fortunately, AAR currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if AAR fits the bill. Thus, it seems as though AAR shares could have a bit more room to run in the near term.
How Does AIR Stack Up to the Competition?
Shares of AIR have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Innovative Solutions and Support, Inc. (ISSC). ISSC has a Zacks Rank of #2 (Buy) and a Value Score of D, a Growth Score of A, and a Momentum Score of D.
Earnings were strong last quarter. Innovative Solutions and Support, Inc. beat our consensus estimate by 150.00%, and for the current fiscal year, ISSC is expected to post earnings of $0.83 per share on revenue of $90.45 million.
Shares of Innovative Solutions and Support, Inc. have gained 17.7% over the past month, and currently trade at a forward P/E of 30.37X and a P/CF of 23.84X.
The Aerospace - Defense Equipment industry is in the top 24% of all the industries we have in our universe, so it looks like there are some nice tailwinds for AIR and ISSC, even beyond their own solid fundamental situation.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
AAR Corp. (AIR): Free Stock Analysis Report Innovative Solutions and Support, Inc. (ISSC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
