AIR - AAR stock slumps 9% as FQ1 sales hit by dried up Afghanistan contracts

AAR ( NYSE: AIR ) stock fell ~9% on Sept. 23 after the company's mixed FQ1 results .

FQ1 adjusted EPS rose +17.31% to $0.61, surpassing analysts estimates by $0.04. However, sales fell -1.93% Y/Y to $446.3M, and failed to beat estimates.

The aero-defense company said its consolidated sales to commercial customers increased 10% Y/Y mainly due to further recovery in the commercial market. But sales to government customers decreased 19% due to the completion of certain government programs, such as Afghanistan contracts.

"Also in the quarter, our government business saw the full impact of the wind down in Afghanistan as well as the completion of certain other programs. As recent awards, such as our USAFE contract, ramp up over time and we win new contracts, we expect growth to return in our government business,” said AAR President and CEO John Holmes in the Sept. 22 earnings release.

The company added that adjusted gross profit margin increased to 18.1% from 16.1%, mainly due to favorable impact from its actions to reduce costs and improve operating efficiency.

Cash flow provided by operating activities from continuing operations was $7M during the current quarter. As of Aug. 31, net debt was $70.7M and net leverage was 0.44x, the company noted.

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