UBS analyst Gavin Parsons maintained a Hold rating on StandardAero, Inc. today and set a price target of $35.00.
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Gavin Parsons has given his Hold rating due to a combination of factors impacting StandardAero, Inc.’s financial outlook. The company is on the cusp of a cash flow turnaround, although the full normalization of cash flow is expected to take a few more years. While StandardAero has consistently exceeded guidance, concerns about cash flow persist, particularly with the need for a strong fourth quarter to meet raised expectations. Management’s confidence in supply chain improvements and strategic decisions to exit low-margin pass-through revenue are seen as positive steps toward enhancing margins and freeing up working capital.
Despite these positive developments, the stock is trading at a relatively low valuation, approximately 12 times the expected 2026 EBITDA, which suggests limited upside potential. The renegotiation of contracts to eliminate low-margin revenue is expected to strengthen margins, but it will also weigh on revenue growth in the near term. While demand and margin drivers remain strong, the long-term free cash flow conversion target is not anticipated to be achieved until 2028, given the current working capital requirements. These factors collectively contribute to the Hold rating, as the market is expected to respond favorably to the company’s results, but significant challenges remain in the near term.
In another report released yesterday, Bank of America Securities also maintained a Hold rating on the stock with a $33.00 price target.