StandardAero (SARO) remains well-positioned despite rising energy prices and broader market concerns, with the recent share softness presenting an "attractive entry point," RBC Capital Markets said in a report emailed Tuesday.
Following meetings with StandardAero management, RBC said the company does not expect the current energy price environment to pose a "near-term risk" to its business, noting crude prices would likely need to remain elevated for at least a year before affecting demand.
StandardAero has not seen customers reduce maintenance spending and highlighted that about 80% of the company's revenue is tied to long-term contracts, with its commercial business sold out through 2027, the report said.
RBC pointed to continued strength in StandardAero's engine aftermarket business, citing growth opportunities tied to LEAP, CFM56 and CF-34 engine programs, with LEAP-related business increasing fourfold in Q1 from a year earlier and the company still targeting about $1 billion in annual LEAP revenue by 2030, according to the report.
StandardAero's exposure to commercial transport, defense and business jets provides a favorable end-market mix, while its focus on narrow-body and regional engines positions the company in faster-growing segments of the aerospace aftermarket industry, the report said.
RBC maintained an outperform rating on StandardAero with a price target of $34.
Price: $26.78, Change: $+0.04, Percent Change: +0.15%