StandardAero Earnings Call Highlights Growth, Cash Turnaround

StandardAero, Inc. ((SARO)) has held its Q4 earnings call. Read on for the main highlights of the call.

StandardAero, Inc. struck an upbeat tone on its latest earnings call, pointing to robust organic growth, stronger margins, and improving cash generation in 2025. Management acknowledged supply chain bottlenecks, a Phoenix facility fire, and the U.S. government shutdown as real headwinds, but argued that accelerating engine platforms and capital flexibility leave the company well positioned heading into 2026.

Record Revenue and Broad-Based Growth

StandardAero reported full-year 2025 revenue of about $5.35 billion in Engine Services, helping lift total company sales roughly 16% year over year. Fourth-quarter revenue reached $1.6 billion, up 13.5% from the prior year period, with all of the growth coming organically rather than from acquisitions.

Adjusted EBITDA Upswing and Margin Expansion

Profitability moved higher alongside revenue, with full-year adjusted EBITDA rising 17% to $808 million and fourth-quarter EBITDA increasing 12.7% to $210 million. Looking ahead to 2026, the company is guiding to adjusted EBITDA of $870 million to $905 million, implying around 10% growth at the midpoint and roughly 70 basis points of margin expansion to about 14%.

Free Cash Flow Inflection and Working Capital Gains

Cash generation turned meaningfully positive in 2025, as StandardAero produced $209 million in free cash flow versus a $45 million use in 2024. Fourth-quarter free cash flow alone was $308 million, supported by working capital improvements and yielding about 75% conversion of net income into free cash flow for the year.

Deleveraging and Shareholder-Friendly Capital Moves

The company used its improving cash profile to strengthen the balance sheet, cutting net debt to adjusted EBITDA from 3.1 times to 2.4 times, squarely within its target range. With leverage down, management authorized a $450 million share repurchase program and reiterated a disciplined capital allocation framework spanning organic investment and selective M&A.

LEAP Ramp Builds Long-Term Platform Opportunity

StandardAero’s LEAP engine program gained serious momentum in 2025, with inductions jumping from 10 engines in 2024 to 60, and second-half LEAP revenues running about 2.5 times the first half. The company has now developed more than 475 LEAP component repairs and completed its first full overhaul, reinforcing confidence in a multi-decade growth runway for this platform.

CRS Outperformance and In-Sourcing Benefits

Component Repair Services posted standout results, with revenue up 19.6% to $709 million and adjusted EBITDA growing about 31% thanks to roughly 250 basis points of margin expansion. The business also benefited from a 15% increase in in-sourced component repair revenue and stronger-than-expected synergies from the ATI acquisition.

Engine Services Strength Across Core Platforms

Engine Services remained the company’s growth engine, posting roughly 15.3% revenue expansion to $5.35 billion driven by CF34, HTF7000, turboprops, LEAP, and CFM56 activity. In the fourth quarter, Engine Services delivered a 13.4% adjusted EBITDA margin, up 60 basis points year over year, as segment EBITDA rose about 15.7%.

Operational Investments and Capacity Expansion

To support rising demand, StandardAero invested about $90 million in key growth platforms during 2025, emphasizing capacity and capability upgrades. The Augusta business aviation facility expansion is now complete for large cabin jets, and the company has announced a Winnipeg CF34 expansion slated to finish in the second half of 2026.

Supply Chain Constraints and Part Delays Persist

Despite progress, management noted that part availability delays are still constraining throughput and tying up working capital across the network. While conditions improved in the fourth quarter, StandardAero cautioned that full normalization of supply chains could take more than 12 months, keeping some pressure on turnaround times and margins.

Margin Dilution from LEAP and CFM56 Ramp

The rapid ramp of LEAP and CFM56 DFW work is currently dilutive to margins because these contracts were initially booked at low or zero margins. Management expects these programs to weigh on reported profitability until industrial learning curves are climbed and sustained profitability is reached during the 2026 ramp.

Phoenix CRS Fire Temporarily Weighs on Results

A small fire at the Phoenix CRS facility in early December forced a shutdown for nearly the entire month, temporarily reducing fourth-quarter revenue and margins for the CRS segment. The site resumed operations in January, but management warned that it will take several months for volumes and efficiency to fully return to prior levels.

U.S. Government Shutdown Hits Military and CRS

The extended U.S. government shutdown disrupted military maintenance activity and CRS operations, softening fourth-quarter performance in those areas. StandardAero anticipates spillover effects into the first quarter of 2026, with some pressure on both margins and revenue growth in these government-exposed lines.

Contract Restructuring Trade-Offs in Reported Revenue

The company is proactively restructuring customer contracts to strip out roughly $300 million to $400 million of low-margin material pass-through revenue. While this initiative should enhance margin visibility and quality, it will also dampen reported top-line growth in the near term, complicating year-over-year comparisons.

Timing Uncertainty on Full Ramp Profitability

Management commentary around the exact timing of full profitability on LEAP and CFM56 ramp programs was somewhat mixed, with references spanning early to second half 2026. This uncertainty leaves investors with some ambiguity on when ramp-related margin dilution will fully reverse, even as the long-term earnings potential remains compelling.

Forward-Looking Guidance and 2026 Outlook

For 2026, StandardAero forecast revenue between $6.275 billion and $6.425 billion, reflecting 4% to 6% growth after removing low-margin pass-through sales, with Engine Services up about 4% at the midpoint and CRS up roughly 11%. Management targets adjusted EBITDA of $870 million to $905 million, adjusted EPS of $1.35 to $1.45, free cash flow of $270 million to $300 million, and maintains leverage at 2.4 times with ample capacity to execute its $450 million buyback.

StandardAero’s earnings call painted a picture of a business balancing near-term disruption with accelerating structural growth drivers and better-quality earnings. With record revenue, expanding margins, a sharp swing to positive free cash flow, and a disciplined balance sheet, the company appears poised for further gains in 2026, even as investors monitor supply chain normalization and the profitability ramp of LEAP and CFM56 programs.