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StandardAero, Inc. (SARO)
NYSE:SARO
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StandardAero, Inc.
(NYSE:SARO)
Rating:68Neutral
Price Target:
$31.00
▲( 10.09% Upside)
Positive Factors
Earnings
SARO reported strong 1Q25 results as demand for engine MRO remained elevated across all channels with Commercial Aerospace up 18% YoY, Business Aviation up 13% YoY and Military & Helicopter up 10% YoY.
Financial Performance
Engine Services generated segment margins of 13.7% vs. consensus of 13.4% and MSe of 12.9%.
Negative Factors
Cash Flow
Operating cash flow reported was below both MSe and consensus estimates.
Investment Risks
The nature of SARO’s maintenance overhaul and repair business may limit the upside margin potential many investors associate with the aerospace aftermarket.
StandardAero, Inc. (SARO) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$9.42B
Dividend YieldN/A
Average Volume (3M)2.43M
Price to Earnings (P/E)133.6
Beta (1Y)1.27
Revenue Growth16.92%
EPS GrowthN/A
CountryUS
Employees7,700
SectorIndustrials
Sector Strength93
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.19
Shares Outstanding334,461,640
10 Day Avg. Volume3,971,778
30 Day Avg. Volume2,427,700
Financial Highlights & Ratios
PEG Ratio-17.62
Price to Book (P/B)3.75
Price to Sales (P/S)0.00
P/FCF Ratio-191.03
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$33.17Price Target Upside17.79% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
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 (65)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $12.53B | 34.02 | 16.35% | 0.49% | 4.96% | 8.41% | |
73 Outperform | $7.99B | 224.12 | 4.62% | ― | 27.03% | 562.31% | |
71 Outperform | $2.16B | 246.75 | -1.08% | ― | 21.07% | -120.95% | |
71 Outperform | $10.92B | 47.07 | 9.50% | 0.22% | 13.58% | 25.96% | |
68 Neutral | $9.42B | 133.65 | ― | 16.92% | ― | ||
65 Neutral | $4.41B | 12.06 | 5.22% | 249.80% | 4.09% | -12.16% | |
37 Underperform | $4.35B | ― | 81.63% | ― | -2.91% | -109.95% |
* Industrials Sector Average
Performance Comparison
SARO
StandardAero, Inc.
28.16
-4.81
-14.59%
AIR
AAR
59.76
-11.04
-15.59%
DRS
Leonardo Drs
41.04
17.38
73.46%
SPR
Spirit AeroSystems
37.12
6.58
21.55%
WWD
Woodward
210.61
26.44
14.36%
LOAR
Loar Holdings Inc.
85.39
33.89
65.81%
StandardAero, Inc. Earnings Call Summary
Earnings Call Date:May 12, 2025
(Q1-2025)
| % Change Since: -1.54%|
Next Earnings Date:Nov 12, 2025
Earnings Call Sentiment Positive
The earnings call reflected a strong start to 2025 with significant revenue growth and an increase in guidance, showcasing robust performance across key segments. However, challenges such as tariff impacts and margin pressures from new program ramps were noted, but they were outweighed by the positive momentum and strategic progress in core areas.Q1-2025 Updates
Positive Updates
Strong Revenue Growth
Revenue grew 16% year-over-year to $1.4 billion, with 14.4% organic growth. Adjusted EBITDA grew by 20% to $198 million.
Commercial Aerospace Performance
Commercial aerospace revenue grew 18% year-over-year, driven by strong demand and engine maintenance activity.
Business Aviation and Military Growth
Business Aviation Group increased 13% and military business grew 10% versus Q1 last year.
Component Repair Services Expansion
Component Repair Services revenue increased 21%, with a 32% growth in adjusted EBITDA and 240 basis points of margin expansion.
Increased 2025 Guidance
Revenue guidance increased to $5.825-$5.975 billion and adjusted EBITDA to $775-$795 million despite a $15 million tariff impact.
LEAP Program Progress
Secured additional regulatory approvals for LEAP engines and completed the first LEAP shop visit and delivery.
CF34 Platform Success
Record quarter on the CF34 platform following investment to expand the GE relationship.
Negative Updates
Tariff Impact
Estimated net impact of tariffs on the business is $15 million for 2025.
Free Cash Flow Usage
Free cash flow was a use of $64 million in Q1 due to working capital needs, taxes, and strategic growth investments.
LEAP and CFM56 Margin Headwinds
Engine Services margins were flat due to initial lower-margin work as production ramps for LEAP and CFM56 programs.
Temporary Headwinds in Component Repair
Temporary headwinds from facility consolidation and exit of a low-margin noncore accessories product line.
Company Guidance
During the StandardAero First Quarter 2025 Earnings Call, several key metrics and projections were highlighted. The company achieved a 16% year-over-year revenue growth, reaching $1.4 billion, and a 20% increase in adjusted EBITDA, totaling $198 million. Adjusted EBITDA margins expanded by 40 basis points to 13.8%. The commercial aerospace sector grew by 18%, driven by high demand across major platforms and engine maintenance activities. Business Aviation and military segments also saw growth, with increases of 13% and 10% respectively. Despite potential tariff impacts estimated at $15 million for 2025, the company raised its sales and earnings guidance, now projecting annual revenues between $5.825 billion and $5.975 billion and adjusted EBITDA between $775 million and $795 million. Free cash flow usage improved by $38 million year-over-year, and the company reported a net debt to adjusted EBITDA leverage ratio of 3.09x. The call also emphasized strategic investments in the LEAP program and component repair capabilities, which are expected to drive long-term growth.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.