{
  "@context": "https://frontierpicks.com/schemas/dossier.v1.json",
  "ticker": "SARO",
  "name": "StandardAero, Inc.",
  "url": "https://frontierpicks.com/dossiers/SARO/",
  "json_url": "https://frontierpicks.com/dossiers/SARO.json",
  "status": "WATCHLIST",
  "current_conviction": "MEDIUM",
  "archetype": {
    "code": "a2",
    "n": 2
  },
  "current_thesis": "StandardAero's engine-overhaul profits are growing faster than revenue: third-quarter 2026 adjusted EBITDA rose 15% and 2026 guidance was raised again on 5 November 2026. The fourth-quarter report, expected around late February 2027, shows whether the margin gains last.",
  "invalidation_trigger": "A daily close below $25.00, which would show the market rejecting the 2026-11-05 guidance raise despite the expanded buyback. Fourth-quarter 2026 adjusted EBITDA below the $905–$920 million guidance range would also end the case.",
  "catalyst_date": "2026-12-31",
  "portfolio": null,
  "pick": null,
  "themes": [
    "defense-aerospace"
  ],
  "tags": [],
  "sources": [],
  "notes": [
    "Affiliates of Carlyle and GIC sold 50 million shares at $31.00 in a January 2026 secondary offering, and further sponsor sales can add share supply.",
    "The company has disclosed material weaknesses in internal control over financial reporting that it is still working to remediate.",
    "StandardAero's 2026 revenue guidance includes a roughly $300 million effect from eliminating material pass-through revenue, which lowers reported growth.",
    "Paul McElhinney became chief executive on 2026-10-01; former CEO Russell Ford serves as executive chairman through 2026-12-31."
  ],
  "source_links": [
    {
      "title": "StandardAero, Inc. - Form 8-K - FY2026",
      "url": "https://www.sec.gov/Archives/edgar/data/0002025410/000202541026000019/saro-ex99_1.htm",
      "date": "2026-11-05"
    },
    {
      "title": "StandardAero, Inc. - Form 10-Q - FY2026",
      "url": "https://www.sec.gov/Archives/edgar/data/0002025410/000202541026000022/saro-20260930.htm",
      "date": null
    },
    {
      "title": "StandardAero Announces CEO Succession Plan",
      "url": "https://standardaero.com/standardaero-announces-ceo-succession-plan/",
      "date": "2026-06-02"
    },
    {
      "title": "quiverquant.com",
      "url": "https://www.quiverquant.com/news/STANDARDAERO+%28%24SARO%29+Releases+Q3+2026+Earnings%2C+Stock+Rises",
      "date": "2026-11-05"
    },
    {
      "title": "StandardAero Announces Pricing of Its Secondary Offering of 50000000 Shares of Common Stock by Affiliates of The Carlyle Group Inc. and GIC",
      "url": "https://www.businesswire.com/news/home/20260127474595/en/standardaero-announces-pricing-of-its-secondary-offering-of-50000000-shares-of-common-stock-by-affiliates-of-the-carlyle-group-inc.-and-gic",
      "date": "2026-01-27"
    },
    {
      "title": "StandardAero Announces Third Quarter Results",
      "url": "https://ir.standardaero.com/news-events/press-releases/detail/141/standardaero-announces-third-quarter-results",
      "date": null
    }
  ],
  "evidence": [
    {
      "claim": "Q3 2026 revenue $1,557.4M, +4.0% YoY; adjusted EBITDA $224.9M, +15.0%, margin 14.4% vs 13.1%",
      "source": "StandardAero Q3 2026 8-K exhibit 99.1",
      "as_of": "2026-11-05"
    },
    {
      "claim": "Engine Services adjusted EBITDA $205.1M, +24.0%, margin 15.0% (+250 bps); Component Repair adjusted EBITDA $48.6M, -9.9%, margin 25.8%",
      "source": "StandardAero Q3 2026 8-K exhibit 99.1",
      "as_of": "2026-11-05"
    },
    {
      "claim": "FY2026 adjusted EPS guidance raised to $1.57–$1.62 from $1.50–$1.57; revenue guidance raised to $6.525–$6.645B from $6.375–$6.500B",
      "source": "Benzinga, 2026-11-05",
      "as_of": "2026-11-05"
    },
    {
      "claim": "Repurchase authorisation raised by $560M to $1.0B; $350M accelerated share repurchase planned with Morgan Stanley",
      "source": "StandardAero Q3 2026 8-K exhibit 99.1",
      "as_of": "2026-11-05"
    },
    {
      "claim": "Net debt $2,307.9M, 2.7x LTM adjusted EBITDA vs 2.9x a year earlier",
      "source": "StandardAero Q3 2026 8-K exhibit 99.1",
      "as_of": "2026-09-30"
    },
    {
      "claim": "BTIG reiterated Buy with a $35 price target; UBS raised its target to $34 from $32 on 2026-11-06",
      "source": "Benzinga / fiscal.ai",
      "as_of": "2026-11-09"
    },
    {
      "claim": "11 open-market insider trades in six months, all sales, including Russell Ford selling 311,423 shares (est. $9.5M)",
      "source": "Quiver Quantitative, compiled from SEC Form 4 filings",
      "as_of": "2026-11-05"
    },
    {
      "claim": "Paul McElhinney became CEO effective 2026-10-01; Russell Ford is executive chairman through 2026-12-31; McElhinney becomes chairman 2027-01-01",
      "source": "StandardAero press release, 2026-06-02",
      "as_of": "2026-06-02"
    }
  ],
  "view_changes": [],
  "body_markdown": "## Current Thesis\nStandardAero's engine-overhaul profits are growing faster than its revenue, and the company raised its 2026 outlook for the second time on 2026-11-05. The fourth-quarter report is expected around 2027-02-26 and settles the case. It shows whether the company met its raised outlook of $905 million to $920 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation). It also shows whether Engine Services margins carry into 2027.\n\nThird-quarter 2026 revenue was $1,557.4 million, up 4.0% year on year, according to the company's 8-K exhibit. Adjusted EBITDA rose 15.0% to $224.9 million. The margin widened to 14.4% from 13.1%. Adjusted diluted earnings per share (EPS) rose 30% to $0.39. Revenue is the weak part: it missed the $1.562 billion consensus, and commercial aerospace revenue grew only 1.3%.\n\nCompany news and filings have not changed the business picture since the 2026-11-10 note. On 2026-11-10 the shares closed at $28.49 in adjusted daily closes. That is 14.0% below the 52-week high of $33.12 and below the $31.00 price of the January 2026 sponsor offering. The 14-day relative strength index (RSI) read 84.9 on that date, which is overbought after the post-report rally.\n\nThe narrative is maturing: the model-overhaul story has been well known since Carlyle and GIC sold 50 million shares at $31.00 in January 2026. The broker reaffirmations of 2026-11-06 and 2026-11-09 renewed attention without adding new facts. Leadership is changing hands. Paul McElhinney, formerly chief executive of GE Aviation Services, became chief executive on 2026-10-01. Russell Ford stays executive chairman through 2026-12-31, according to the company's 2026-06-02 release.\n\n## Bull Case\n- **Engine Services margins at a record.** Engine Services adjusted EBITDA rose 24.0% to $205.1 million in the third quarter of 2026. The segment margin widened 250 basis points to 15.0% (company 8-K, 2026-11-05).\n- **Guidance raised a second time.** On 2026-11-05 the company raised full-year 2026 adjusted EPS guidance to $1.57–$1.62 from $1.50–$1.57, against a $1.51 consensus. It raised revenue guidance to $6.525–$6.645 billion from $6.375–$6.500 billion (Benzinga, 2026-11-05).\n- **Buyback capacity more than doubled.** The board raised the repurchase authorisation by $560 million to $1.0 billion. It also plans a $350 million accelerated share repurchase with Morgan Stanley (company 8-K, 2026-11-05). In the third quarter the company bought back about 2.2 million shares for $50.5 million (Q3 2026 10-Q).\n- **Leverage is falling.** Net debt was $2,307.9 million on 2026-09-30, or 2.7 times trailing adjusted EBITDA, down from 2.9 times a year earlier (company 8-K).\n- **Analyst targets sit above the shares.** BTIG reiterated its $35 target on 2026-11-09 and UBS raised its target to $34 from $32 on 2026-11-06. CIBC's target is $35 (2026-10-26) and RBC's is $32 (2026-10-28).\n\n## Bear Case\n- **Revenue growth is slow.** Third-quarter revenue of $1,557.4 million missed the $1.562 billion estimate, and commercial aerospace grew 1.3% (company 8-K; Benzinga, 2026-11-05). GAAP EPS of $0.28 missed the $0.31 estimate.\n- **Component Repair margins compressed.** Component Repair Services adjusted EBITDA fell 9.9% to $48.6 million. Its margin fell 490 basis points to 25.8%, which the company put down to productivity and mix (company 8-K, 2026-11-05).\n- **Cash conversion lags earnings.** Operating cash flow for the first nine months of 2026 was $81.7 million. Full-year guidance calls for $270–$300 million of adjusted free cash flow (company 8-K, 2026-11-05).\n- **Insiders have been selling.** Quiver Quantitative compiles SEC Form 4 filings. It counts 11 open-market insider trades in the six months to 2026-11-05, all of them sales. They include an estimated $9.5 million sale of 311,423 shares by Russell Ford, now executive chairman.\n- **Momentum is stretched.** The 14-day RSI stood at 84.9 on 2026-11-10. Readings that high often come before a pullback toward recent closes.\n\n## Setup & Price Structure\nThe shares closed at $28.49 on 2026-11-10 in adjusted daily closes. They rose 5.1% over three months and sit 14.0% below the 52-week high of $33.12. The $31.00 January 2026 secondary-offering price is the nearest reference above the last close. The $33.12 high is the next.\n\nThe crowding signs are mixed. On the overheated side, the 14-day RSI of 84.9 is high and insiders have only sold over six months. No earnings date falls in the next 30 days. The planned $350 million accelerated repurchase adds company buying, against the risk of further sponsor share supply.\n\nA daily close below $25.00 would wipe out the rally that followed the guidance raise. It would show the market rejecting the 2026-11-05 report despite the bigger buyback.\n\n## Catalyst Calendar (next 30 days)\n- The company has announced no earnings date, investor day or other dated event between 2026-11-11 and 2026-12-11.\n- 2026-12-31: Russell Ford's term as executive chairman ends. Paul McElhinney becomes chairman on 2027-01-01, completing the handover announced on 2026-06-02.\n- ~2027-02-26, est.: the fourth-quarter and full-year 2026 report, with the first 2027 guidance. The case turns on this report. It shows whether the $905–$920 million adjusted EBITDA and $270–$300 million free cash flow guidance were met.\n\n## What Would Change Our Mind\nThe case breaks if the margin gains fail to last. That would mean fourth-quarter 2026 adjusted EBITDA below the $905–$920 million guidance range, or an Engine Services margin sliding back from the third quarter's 15.0%. Full-year adjusted free cash flow below $270 million would also break it. So would Component Repair Services EBITDA below the $205–$210 million segment guidance.\n\nSupply is the second risk. A new Carlyle or GIC secondary offering, or more executive sales in SEC Form 4 filings, would weigh on the shares while the revenue picture is still slow. On price, a daily close below $25.00 ends the case.\n\nCommercial aerospace revenue growth clearly above the 1.3% of the third quarter of 2026 would strengthen the case. So would 2027 guidance implying Engine Services margins above 15%.\n\n## Correlation Notes\nStandardAero is grouped with defense and aerospace names such as Karman (KRMN) and Cadre (CDRE). However, its earnings depend mostly on commercial engine shop visits, such as the LEAP-1A overhaul work Air Corsica awarded on 2026-10-27. Defense budget news therefore moves it less than it moves those peers. Airline capacity, engine-maker aftermarket comments and sponsor share sales are the inputs most likely to move the shares together with or apart from the group. A broad rally in the defense group would not offset a fourth-quarter shortfall in Engine Services margins.",
  "first_seen": "2026-11-08",
  "last_analyzed": "2026-11-11T03:36:14+00:00",
  "last_synthesized": "2026-11-11",
  "date_modified": "2026-11-11",
  "license": "Content © FrontierPicks. Cite the canonical URL."
}