StandardAero's Margins Expected to Expand Long Term, Near-Term Upside Limited, BofA Says
StandardAero (SARO) has multiple margin improvement opportunities, though meaningful benefits will take time, with the brokerage viewing cost-control measures positively, including removing low-to-no-margin pass-through revenue, BofA said in a Thursday note.The brokerage said the efforts lifted adjusted EBITDA margin by 100 basis points year over year to 14.4% in Q2, while BofA expects Component Repair Services margins to improve in the second half as work migrates and labor ramps ease.BofA expects engine program ramps to support margins, with LEAP and CFM56 DFW operations turning profitable in Q2, while long-term margin expansion should continue despite limited near-term improvement.The analyst said strong Q2 cash generation and higher free cash flow guidance are encouraging, with excess capital expected to support share repurchases in the second half of 2026 and $350 million remaining under the buyback authorization.BofA reiterated a neutral rating on the stock and lowered its price target to $27 from $35.StandardAero shares were down 1.4% in Thursday trading.Price: $22.82, Change: $-0.31, Percent Change: -1.34%