AAR's (AIR) setup heading into fiscal Q1 2027 earnings looks favorable, supported by constructive commentary from commercial aftermarket peers exiting calendar Q2 2026, RBC Capital Markets said in a research note emailed Monday.

While aftermarket fundamentals are supportive of AAR's fiscal 1Q targets, RBC lowered its adjusted earnings before interest, taxes, depreciation and amortization margin to account for the approximately 50-basis-point headwind from the wind-down of AAR's Legacy Commercial Programs, the note said.

For fiscal Q1, RBC expects 22.5% core-business revenue growth, including about 7% organic growth, with a $15 million year-over-year headwind from Legacy Commercial Programs. The firm lowered its adjusted EBITDA margin to 12% from 12.5% and said it believes its growth estimates are "conservative."

Regarding Legacy Commercial Programs, RBC said it expects the business could remain on AAR's books for another three to four years and models an annual revenue step-down of about $60 million.

AAR is scheduled to report its fiscal Q1 results after the market closes Tuesday.

RBC maintained its Outperform rating and $145 price target.

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