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StandardAero, Inc. (SARO)
NYSE:SARO
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StandardAero, Inc.
(NYSE:SARO)
63Neutral
Positive Factors
Earnings
The outperformance of the stock was driven by a strong earnings report in which top line and adj. EBITDA were above expectations.
Growth Opportunities
SARO continued to invest in the LEAP, CFM56, and CF34 engine programs to position the company for incremental growth opportunities in the future.
Market Demand
The demand backdrop for engine aftermarket remains strong, providing a positive outlook.
Negative Factors
Cash Flow
The underperformance of the stock was largely driven by negative operating cash flow compared to consensus expectations for positive cash generation.
Margins
Most of the capacity will go unused in the near term, which is expected to cap margins.
Market Response
StandardAero reported their first quarter as a public company and received a lackluster response from the market.
StandardAero, Inc. (SARO) vs. S&P 500 (SPY)
Market Cap
$8.52B
Dividend YieldN/A
Average Volume (3M)4.00M
Price to Earnings (P/E)798.7
Beta (1Y)1.21
Revenue Growth14.77%
EPS GrowthN/A
CountryUS
Employees7,700
SectorIndustrials
Sector Strength67
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.03
Shares Outstanding334,461,640
10 Day Avg. Volume3,631,781
30 Day Avg. Volume4,000,892
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)2.10
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$33.60Price Target Upside31.87% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering5
StandardAero, Inc. Business Overview & Revenue Model
Company DescriptionStandardAero, Inc. (SARO) is a leading provider of aircraft maintenance, repair, and overhaul (MRO) services. The company operates in the aerospace sector, offering a comprehensive range of services including engine maintenance, airframe repair, avionics upgrades, and component repair and overhaul. StandardAero serves a diverse clientele that includes commercial aviation, business aviation, military, and industrial power customers around the globe.
How the Company Makes MoneyStandardAero makes money primarily through its MRO services offered to a wide range of customers in the aerospace industry. The company's revenue model is built on providing essential maintenance and repair services that ensure the safety, efficiency, and longevity of aircraft and their components. Key revenue streams include contracts with commercial airlines, business jet operators, and military organizations for scheduled maintenance, unscheduled repairs, and component overhauls. Additionally, StandardAero benefits from strategic partnerships with original equipment manufacturers (OEMs) and airlines, which can include exclusive service agreements and joint ventures. These partnerships enhance the company's capabilities and market reach, contributing significantly to its earnings.
StandardAero, Inc. Financial Statement Overview
Summary
StandardAero, Inc. shows strong revenue growth and improving profitability margins. The balance sheet reflects a decrease in leverage, though high debt levels remain a concern. Cash flow management needs improvement, as free cash flow is still negative despite better operating cash flows. The company is on a positive trajectory but must address cash flow and leverage challenges for financial stability.Income Statement
StandardAero, Inc. shows strong revenue growth with a 14.8% increase from 2023 to 2024, and a 10% increase from 2022 to 2023. The gross profit margin improved to 14.4% in 2024 from 13.9% in 2023, indicating better cost management. The net profit margin turned positive at 0.2% in 2024, recovering from a net loss in previous years. However, EBIT and EBITDA margins, while positive, indicate room for improvement at 7.7% and 10.5%, respectively.75
Positive
Balance Sheet
The company's debt-to-equity ratio improved to 1.02 in 2024 from 2.94 in 2023, showing a reduction in leverage. Return on equity increased to 0.5% in 2024 from negative figures previously, but remains relatively low. The equity ratio improved to 38.2% from 19.9% in 2023, indicating stronger equity compared to total assets. Despite these improvements, high debt levels pose a potential risk.68
Positive
Cash Flow
Operating cash flow increased slightly to $76.3M in 2024, and the free cash flow improved, though still negative at -$46.9M. The free cash flow to net income ratio remains negative, reflecting ongoing challenges in generating free cash flow. The operating cash flow to net income ratio is positive, indicating some efficiency in converting profits into cash flow.60
Neutral
| Breakdown | ||
| Dec 2024 | Dec 2023 | Dec 2022 |
|---|---|---|
| Income Statement | Total Revenue | |
| 5.24B | 4.56B | 4.15B | Gross Profit |
| 754.16M | 635.28M | 545.68M | EBIT |
| 403.22M | 337.36M | 262.63M | EBITDA |
| 551.34M | 511.87M | 460.21M | Net Income Common Stockholders |
| 10.97M | -35.06M | -21.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |
| 102.58M | 57.98M | 120.06M | Total Assets |
| 6.21B | 5.76B | 5.73B | Total Debt |
| 2.41B | 3.38B | 3.37B | Net Debt |
| 2.31B | 3.32B | 3.25B | Total Liabilities |
| 3.84B | 4.61B | 4.53B | Stockholders Equity |
| 2.37B | 1.15B | 1.20B |
| Cash Flow | Free Cash Flow | |
| -46.85M | -17.42M | -16.95M | Operating Cash Flow |
| 76.33M | 67.89M | 27.26M | Investing Cash Flow |
| -235.45M | -112.86M | -60.75M | Financing Cash Flow |
| 203.76M | -14.69M | -25.78M |
StandardAero, Inc. Risk Analysis
StandardAero, Inc. disclosed 56 risk factors in its most recent earnings report. StandardAero, Inc. reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
StandardAero, Inc. Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $9.70B | 45.82 | 8.73% | 0.25% | 14.44% | 26.36% | |
71 Outperform | $10.04B | 28.30 | 16.82% | 0.61% | 7.38% | 26.61% | |
71 Outperform | $7.96B | 345.67 | 2.95% | ― | 26.88% | ― | |
63 Neutral | $8.52B | 798.75 | ― | 14.77% | ― | ||
62 Neutral | $4.16B | 11.30 | 5.46% | 215.76% | 4.12% | -8.55% | |
60 Neutral | $1.91B | 246.75 | -1.08% | ― | 21.07% | -120.95% | |
37 Underperform | $3.85B | ― | 81.63% | ― | 4.44% | -202.63% |
* Industrials Sector Average
Performance Comparison
SARO
StandardAero, Inc.
25.48
-7.49
-22.72%
AIR
AAR
52.81
-13.41
-20.25%
DRS
Leonardo Drs
36.46
15.57
74.53%
SPR
Spirit AeroSystems
33.47
0.57
1.73%
WWD
Woodward
169.17
21.80
14.79%
LOAR
Loar Holdings Inc.
85.07
35.36
71.13%
StandardAero, Inc. Earnings Call Summary
Earnings Call Date: Mar 10, 2025 | % Change Since: -3.12% | Next Earnings Date: Nov 12, 2025
Earnings Call Sentiment Positive
The earnings call revealed strong performance driven by significant growth in adjusted EBITDA and successful developments in strategic programs like LEAP. The commercial aerospace market showed robust growth, complemented by successful new contracts and market expansions. However, challenges included negative free cash flow due to one-time expenses and initial low margins on new programs. Overall, the positive highlights significantly outweigh the lowlights, indicating a strong future outlook.Highlights
Record Growth in Adjusted EBITDA
StandardAero reported a 23% growth in adjusted EBITDA for the year with an even stronger 37% growth in Q4, driven by robust market demand and strong execution.
Successful LEAP Program Development
The company made significant progress with the LEAP program, including the industrialization of their state-of-the-art LEAP MRO line and achieving all 2024 milestones.
Major New Contracts and Market Expansion
StandardAero signed agreements with nine different customers for the LEAP program, representing future revenue of over $1 billion, and received authorization from the Chinese aviation regulator CAAC.
Commercial Aerospace Market Growth
The commercial aerospace market exhibited 25% growth in 2024, with Q4 growth at 33%, driven by strong demand.
Successful IPO and Debt Refinancing
StandardAero completed its IPO in October and refinanced its debt, resulting in over $130 million of annual interest savings and a reduction in leverage to 3.1 times.
Lowlights
Negative Free Cash Flow
The company reported a negative free cash flow of $45 million for the full year 2024 due to one-time expenses related to IPO, debt refinancing, and integration costs.
Challenges in Military Segment
Revenue in the military and helicopter end market faced a decline, primarily due to lower inductions on the Rolls-Royce AE 1107 engine following the temporary grounding of the V-22 Osprey.
Initial Low Margins on New Programs
Margins are expected to be initially low on the LEAP and CFM56 programs as production ramps up in 2025.
Company Guidance
During StandardAero's Fourth Quarter and Full-Year 2024 Earnings Conference Call, the company provided optimistic guidance for 2025, projecting revenue between $5.8 billion and $5.95 billion, driven by sustained demand across their markets, particularly in commercial aerospace with anticipated low double-digit to mid-teens growth. They expect adjusted EBITDA to be in the range of $770 million to $790 million, indicating continued margin expansion. The company's strategic priorities include finalizing the LEAP program build-out, leveraging investments in the CFM56 and CF34 platforms, and further expanding their Component Repair Services (CRS) business. StandardAero aims to enhance operational efficiencies and profitability through these initiatives, supported by their recent public offering and debt refinancing, which are expected to yield over $130 million in annual interest savings. The company also plans to continue exploring accretive M&A opportunities to complement their existing portfolio.StandardAero, Inc. Corporate Events
Private Placements and Financing
StandardAero Stockholders Announce Secondary Offering
Neutral
Mar 24, 2025
On March 24, 2025, StandardAero, Inc. announced that two of its stockholders, affiliates of The Carlyle Group Inc. and GIC Private Limited, plan to sell 30,000,000 shares of the company’s common stock in an underwritten secondary offering. The selling stockholders will receive all net proceeds from the sale, with no shares being sold by the company. The offering, managed by J.P. Morgan, Morgan Stanley, and RBC Capital Markets, includes a 30-day option for underwriters to purchase an additional 4,500,000 shares. This move does not impact StandardAero directly but reflects the selling stockholders’ decision to liquidate part of their holdings.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.