AAR Q4 FY26 slides: 26% sales growth, margins expand despite acquisitions

The market is likely penalizing AIR for being "good, not new": the business is compounding, but the re-rating case now depends on proving that platform mix can lift free cash flow, not just EBITDA. The key tell is cash conversion: if growth continues to consume working capital and acquisition integration keeps dragging near-term margins, the stock can stall even with double-digit revenue growth. In other words, the next leg is a quality-of-earnings story, not a growth story.

Second-order, AIR is quietly becoming a better toll-booth on airline maintenance complexity. Its software/procurement tools deepen switching costs for customers like DAL while making third-party MRO activity more data-dependent, which should pressure smaller repair shops and less integrated distributors. The Woodward channel win matters more as a control-point expansion than as pure volume; AIR is monetizing access and workflow, while suppliers may get incremental throughput but not the economics.

Over 1-3 months, the catalyst path is Q1 margin guidance and integration milestones; over 6-18 months, the question is whether the company can keep leverage near target while funding M&A without diluting FCF. The contrarian view is that consensus is too focused on headline growth and underappreciates that a near-peak share price plus only modest margin expansion leaves little room for disappointment. Thesis breaks if FY27 margin guidance falls below the low end or net leverage re-accelerates above 2.5x due to integration slippage or weaker flight-hour demand.