11:23 AM EDT, 09/19/2024 (MT Newswires) -- AAR's (AIR) adjusted operating margin is likely to be a focus for investors when it reports fiscal Q1 results on Sept. 23, RBC Capital Markets said in an earnings preview.

The firm said AAR delivering on its roughly 9% adjusted operating margin guide for fiscal Q1 is important for investors to have faith in the company's target to exit fiscal 2025 at about 10% adjusted operating margins.

"Margins remain the most critical element for stock sentiment in our view," RBC said in a note Wednesday.

The firm said investors are also likely to focus on the outlook for continued aftermarket growth.

"We continue to believe that broader aftermarket outlook remains strong, but the continued lack of aircraft retirements will pressure the availability of [used serviceable material]," the firm said.

AAR acquired Triumph Group's (TGI) product support business for $725 million in cash earlier this year.

The company's management guided towards fiscal Q1 revenue growth of 15% to 19%, which includes the acquisition of the product support business, according to RBC, adding that the acquisition may contribute over $70 million to the quarterly revenue and $300 million to fiscal 2025.

RBC maintained the aviation services provider's outperform rating and $85 price target.

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