Toward the end of the lightning round of Mad Money on September 30, a caller inquired about StandardAero, Inc. (NYSE:SARO) while mentioning that they are aware that the host has not been recommending aerospace plays these days. Jim Cramer replied:
See, you got me covered. You know it’s an aerospace play. You got to accept the fact that the next move is down. Can you do that? If you can handle that, you can do it and then buy it. But you got to accept that.
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Commercial Aerospace Demand And Earnings Growth
StandardAero, Inc. continues to report growth across its core aftermarket services business. In the second quarter, revenue increased 4.6% year-over-year to $1.6 billion, while net income rose 43.7% to $97.3 million. Adjusted diluted EPS increased 24% to $0.40, and adjusted EBITDA climbed 12.3% to $229.9 million. The adjusted EBITDA margin also expanded to 14.4% from 13.4% a year earlier.
Commercial aerospace revenue increased 5.7% year-over-year in the quarter, while business aviation revenue rose 5.6%. Engine Services revenue increased 4% to $1.41 billion, with segment adjusted EBITDA rising 14.4% to $204.2 million. The company also reported continued demand across its aftermarket operations and raised its full-year 2026 guidance. The company now expects 2026 revenue of $6.375 billion to $6.5 billion, adjusted EBITDA of $885 million to $910 million and adjusted diluted EPS of $1.50 to $1.57. Its updated guidance assumes low-double-digit to mid-teens growth in commercial aerospace revenue, low-double-digit growth in military and helicopter revenue, and high-single-digit to low-double-digit growth in business aviation. At approximately $21.05 per share, StandardAero, Inc. trades at roughly 16x forward earnings based on current estimates, lower than its sector median of around 19.2x and S&P 500’s 18.9x to 19.4x.
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Aerospace Cyclicality And Balance Sheet Risks
StandardAero, Inc.’s exposure to commercial and business aviation leaves it sensitive to changes in flight activity, airline financial conditions and broader economic conditions. The company has warned that lower aircraft utilization, changes in customer travel patterns, airline bankruptcies and weaker aviation demand could reduce demand for aftermarket services.
The company also carries substantial indebtedness, with $2.33 billion of total debt as of June 30, although it said its existing liquidity was adequate for the next 12 months and the foreseeable future. It has warned that higher interest rates, tighter credit conditions or changes in the aviation industry’s financial environment could restrict access to capital and negatively affect liquidity.
There were also mixed developments within the company’s segments during the latest quarter. Component Repair Services revenue increased 9.2%, but adjusted EBITDA declined 0.9% to $51.2 million, while the segment’s adjusted EBITDA margin fell to 26.3% from 29%. Military and helicopter revenue declined 2.6% year-over-year, partly offsetting growth in commercial aerospace and business aviation. The roughly 16x forward earnings multiple needs to be viewed along with the company’s dependence on continued aerospace demand, execution of its growth plans, and ability to manage its debt load.
The Institutional and Short-Seller Picture
According to Insider Monkey’s database, 41 hedge funds held positions in StandardAero, Inc. in Q2, down from 59 funds in the preceding quarter. MD Sass remained the company’s top shareholder among the hedge funds tracked by Insider Monkey with nearly 2.35 million shares, up 10% sequentially. Meanwhile, short interest stood at 11.60% of the public float.
StandardAero, Inc.’s latest results show continued demand in commercial aerospace and business aviation, alongside double-digit adjusted EBITDA and earnings growth. However, Cramer’s comments point to the possibility of further share-price pressure, while the company’s aviation exposure, indebtedness and elevated short interest remain important considerations for investors.
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