StandardAero Q2 Earnings Call Highlights

Key Points

• Strong Q2 performance: Revenue rose 4.6% year over year to $1.6 billion, while adjusted EBITDA increased 12.3% to $230 million and margins reached a record 14.4%. Net income, adjusted EPS and free cash flow also improved significantly.
• Growth investments bolster future results: StandardAero signed a $180 million OEM license expansion expected to generate $25 million in annual adjusted EBITDA at full run rate and completed the acquisition of Unified Turbines’ component-repair business.
• 2026 outlook raised: The company increased revenue guidance to $6.375 billion-$6.5 billion, adjusted EBITDA guidance to $885 million-$910 million and adjusted EPS guidance to $1.50-$1.57, while leverage declined to 2.6 times adjusted EBITDA.

StandardAero NYSE: SARO reported second-quarter 2026 revenue growth, record adjusted EBITDA margins and positive free cash flow, while raising its full-year revenue, adjusted EBITDA and adjusted earnings-per-share outlook.

Revenue for the quarter ended June 30 rose 4.6% year over year to $1.6 billion. Adjusted EBITDA increased 12.3% to $230 million, and adjusted EBITDA margin expanded 100 basis points to a record 14.4%. Net income rose 43.7% to $97 million, while adjusted EPS increased 24% to $0.40. Free cash flow was a positive $50 million during the quarter.

Chairman and Chief Executive Officer Russell Ford said the results reflected strong demand, productivity improvements and pricing in commercial aerospace and business aviation. He also cited profitability reached during the quarter at the company’s LEAP and CFM56 Dallas/Fort Worth programs, along with the benefit from eliminating low- or no-margin material pass-through revenue under contracts restructured last year.

Commercial and business aviation demand remains strong

Commercial Aerospace revenue increased 6% year over year. Excluding the effect of the eliminated pass-through revenue, management said commercial aerospace growth would have been in the mid-teens. Ford said industry MRO capacity remains constrained and StandardAero’s commercial backlog continued to grow during the quarter.

Business aviation revenue also rose 6%, supported by activity on midsize and super-midsize platforms. Ford said global business-jet flight activity increased and fleet utilization continued to generate engine-maintenance demand.

Military and helicopter revenue declined 3% because of input delays on certain military platforms. However, the company maintained its outlook for low-double-digit military and helicopter growth for the full year, with growth weighted toward the second half.

Ford said the company has not seen a demand reduction tied to higher jet fuel prices. Management tracks shop-visit bookings, engine inductions, parts orders and asset-trading activity, which Ford said remained consistent with the strength seen entering the year. He noted that nearly 40% of the company’s business serves end markets not sensitive to jet fuel prices, including military applications.

Engine Services margin expands; CRS faces temporary pressure

Engine Services revenue rose 4% to $1.405 billion, while segment adjusted EBITDA increased 14.4% to $204 million. Segment adjusted EBITDA margin expanded 130 basis points to 14.5%.

Chief Financial Officer Dan Satterfield said the segment benefited from volume, pricing, productivity gains, progress along the learning curve on the LEAP and CFM56 Dallas/Fort Worth programs, and the margin impact of removing low-margin pass-through revenue.

Component Repair Services revenue increased 9.2% to $195 million, driven by commercial aerospace activity on CFM56, GTF and CF34 platforms, as well as growth in aeroderivative land and marine power-generation work. However, CRS adjusted EBITDA declined 0.9% to $51 million, and its adjusted EBITDA margin fell 270 basis points to 26.3%.

Satterfield attributed the decline to the migration of component-repair work into back shops at existing facilities, temporary inefficiencies from hiring and training employees, and unfavorable mix from military-platform input delays. He said the company expects pressure related to work migration and labor ramping to ease in the second half and reiterated full-year CRS guidance, which implies a return to a high-20% margin profile later in the year.

License expansion and Unified Turbines acquisition support growth plans

StandardAero signed a $180 million license expansion agreement with an unnamed key OEM partner. The agreement covers multiple turbofan and turboprop platforms, broadens authorizations, adds engine variants at several locations, improves economics on existing work and adds component-repair authorizations.

The company expects the agreement to generate approximately $25 million in incremental annual adjusted EBITDA at full run rate, at margins above the company average. Satterfield said the expected contribution is $10 million in 2027, $20 million in 2028 and $25 million annually in 2029 and beyond, with about 80% of the incremental EBITDA expected in Engine Services.

Ford said StandardAero also completed its acquisition of Unified Turbines’ Component Repair business during the quarter. The acquisition, announced in May, is intended to expand hot-section repair capabilities on engines StandardAero already supports and advance its insourcing strategy. Integration is underway, according to management.

The company said its CF34 expansion in Winnipeg remains on track for completion in the third quarter. Ford said the added capacity is effectively sold out and is expected to begin scaling through 2027. StandardAero continues to expect its LEAP program to reach $1 billion in annual revenue by the end of the decade and several billion dollars annually by the middle of the next decade, as heavier maintenance work scopes emerge.

Guidance raised as balance sheet leverage declines

StandardAero raised its 2026 revenue outlook by $50 million to a range of $6.375 billion to $6.5 billion. It increased adjusted EBITDA guidance to $885 million to $910 million and raised adjusted EPS guidance to $1.50 to $1.57.

• Commercial aerospace growth is expected in the low-double-digit to mid-teens range after normalizing for eliminated pass-through revenue.
• Business aviation growth is expected in the high-single-digit to low-double-digit range.
• Military and helicopter growth is expected in the low-double-digit range, weighted toward the second half.
• Adjusted free cash flow guidance was maintained at $270 million to $300 million.
• Capital expenditure guidance remained $100 million to $110 million.

The updated adjusted EPS outlook excludes tax-adjusted amortization of all intangible assets. Guidance assumes interest expense of $150 million to $160 million, an adjusted effective tax rate of 23.5% to 25.5%, and average diluted shares outstanding of approximately 332.5 million.

Net debt to adjusted EBITDA ended the quarter at 2.6 times, compared with 3.0 times a year earlier. Moody’s and S&P upgraded the company’s ratings during the quarter to Ba2 and BB, respectively. StandardAero repurchased $40 million of shares in the second quarter, bringing year-to-date repurchases to $100 million.

Ford said Paul McElhinney will join him on the company’s next earnings call as StandardAero’s new chief executive officer.

About StandardAero (NYSE:SARO)

StandardAero is a global aerospace maintenance, repair and overhaul (MRO) provider specializing in gas turbine engines, auxiliary power units (APUs), airframe components and oil & gas rotating equipment. The company offers a full suite of technical services including engine repair and overhaul, component repair, accessory maintenance, parts manufacturing and on-site field support. Its customer base spans commercial airlines, business and general aviation operators, regional carriers, original equipment manufacturers (OEMs) and defense organizations.

With roots dating back to 1911, StandardAero has grown through strategic acquisitions and organic expansion to become one of the largest independent MRO providers in the industry.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source