StandardAero Attracts Brokerage Attention Post-IPO

Investing.com — StandardAero (NYSE:SARO) recently drew interest from major brokerages after its IPO in October.

Morgan Stanley

Morgan Stanley initiated coverage with an “equal-weight” rating and a price target of $33. The analysts noted that StandardAero operates as a focused player in the maintenance, repair, and overhaul (MRO) sector.

The company services a variety of aircraft engines and components across commercial, military, and business aviation markets. Morgan Stanley’s report highlights strong demand for engine maintenance, driven by rising air traffic levels and increased military spending, creating favorable conditions for StandardAero.
However, it also cautions that the stock’s recent rise of about 30% since its IPO has balanced the risk and reward at the current price level. Potential challenges include operational execution risks and lower-than-expected growth.

Jefferies

Jefferies initiated coverage with a “buy” rating and a price target of $38. The analysts emphasized the importance of StandardAero’s investments in its Component Repair Services (CRS) business, which has shown higher profit margins than its main engine services segment. Jefferies predicts 12% annual revenue growth through 2027, bolstered by maintenance programs for key engines such as the CFM56 and LEAP models. They also project a 16% compound annual growth rate (CAGR) in EBITDA, attributed to enhanced operational efficiency and in-sourcing repairs. Jefferies views the current strategy, which includes potential mergers and acquisitions, as beneficial for long-term growth.

RBC Capital Markets

RBC Capital Markets has initiated an “outperform” rating with a $37 price target. The company’s recent IPO raised $1.2 billion at $24 per share, positioning it well to benefit from its exclusive focus on engine aftermarket services. RBC anticipates 12.7% annual revenue growth through 2026, driven by key engine programs including LEAP, CFM56, and CF34. While margins may face limitations due to material costs in the fleet segment, the CRS, with higher margins, is expected to underpin profitability and future acquisitions. RBC applies a 16x EV/EBITDA multiple to 2026 estimates.

Bernstein

Bernstein has also provided an “outperform” rating and set a price target of $39. They project 10% annual revenue growth and 13% adjusted EBITDA growth through 2028, largely due to demand from engine platforms like CFM56, LEAP, and CF34. The CRS segment, accounting for 11% of revenue, is expected to substantially enhance profitability. Bernstein expresses confidence in StandardAero’s acquisition history but acknowledges risks such as airline overcapacity and OEM parts shortages that could restrict MRO operations. They apply a 13.6x EV/EBITDA multiple for valuation.

UBS

Finally, UBS initiates a “neutral” rating and sets a 12-month price target of $34. They highlight several positive aspects of StandardAero’s business, including its exclusive focus on the MRO sector and favorable conditions arising from aging aircraft fleets and delayed new deliveries. Key growth drivers identified by UBS include LEAP and CFM56 engines, expected to provide $700 million in additional revenue by 2028 and potentially $1.6 billion by 2030. UBS forecasts 11% annual revenue growth through 2028, but warns growth in other commercial segments may face challenges. They also project 300 basis points of EBITDA margin expansion by 2028, driven primarily by CRS growth. While free cash flow margins are expected to increase from 0% to 7%, UBS notes that margins still lag behind those of industry peers, indicating structural challenges. Their valuation is set at 16.9x EV/EBITDA.