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On August 6, StandardAero (NYSE:SARO) reported second-quarter results that leaned harder on margin than on revenue, and the numbers show why that distinction matters. Revenue grew a modest 4.6% to $1.60 billion for the three months ended June 30, but net income jumped 43.7% to $97.3 million and adjusted diluted earnings per share climbed 24% to $0.40. That gap between the top line and the bottom line is the real story of the quarter.
The margin expansion here is hard to miss. Adjusted EBITDA rose 12.3% to $229.9 million, pushing the adjusted EBITDA margin to 14.4%, up 100 basis points from a year earlier. Chief Executive Officer Russell Ford tied the gain to eliminating low-margin, pass-through material revenue from restructured contracts and to reaching profitability on the LEAP and CFM56 DFW engine programs during the quarter, two platforms that had previously weighed on results. The Engine Services segment, StandardAero's largest, showed an even sharper improvement, with segment Adjusted EBITDA up 14.4% and margins climbing 130 basis points to 14.5%.
Demand held up across most of the business. Commercial aerospace revenue grew 5.7%, and business aviation grew 5.6% year over year, offsetting a decline in military and helicopter work. Management is betting the recovery broadens further: full-year guidance now calls for commercial aerospace growth accelerating into the low double digits to mid teens, alongside a pickup in military and helicopter revenue. The company also signed a license agreement with a key OEM partner that it says improves economics across multiple platforms, closed its acquisition of Unified Turbines to expand component repair capabilities, and kept buying back stock, building a $101.0 million treasury stock position. On the strength of all this, StandardAero raised its full-year revenue, Adjusted EBITDA, and Adjusted Diluted EPS guidance.
Not every line in the release points in the same direction. StandardAero used $72.3 million of cash in operations during the quarter, even as it reported a $50.2 million inflow in Free Cash Flow, a gap worth watching rather than glossing over. Component Repair Services, the smaller of the two segments, told a weaker story: while revenue grew 9.2% to $194.6 million, segment Adjusted EBITDA slipped 0.9% to $51.2 million, and margins fell 270 basis points to 26.3% because of an unfavorable sales mix, with input delays also holding back revenue on certain military platforms.
The balance sheet moved in the wrong direction too. Cash on hand fell from $289.7 million at the end of 2025 to $179.1 million by June 30, while long-term debt grew from $2.19 billion to $2.30 billion over the same stretch, even as the company kept repurchasing shares. Ford himself pointed to a higher fuel price environment as a headwind the business is operating against. And the military and helicopter end market, the one segment that shrank this quarter, down 2.6% year over year, is the segment guidance leans on hardest to reverse course for the rest of the year.
Hedge fund ownership of StandardAero fell from 59 funds to 41 in the most recent quarter, pointing to institutions trimming rather than building positions. Short interest sits at 7.99% of the float, a level that signals a real bear camp has formed around the stock. The stock trades at a forward P/E of 14.60, as of September 16, a multiple that does not scream expensive for a company growing adjusted earnings per share by double digits. That combination is the tension defining how the market is pricing this quarter.
StandardAero's second quarter shows a business converting revenue into profit more efficiently than it has in years, and the decision to raise full-year guidance reflects real confidence that the trend continues. Still, the quarter left open questions: cash used in operations ran negative even as free cash flow turned positive, debt grew while cash reserves shrank, and the smaller Component Repair Services segment lost some of its margin edge. Whether the license agreement and the newly profitable engine programs keep lifting Engine Services matters more than any single guidance number.
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