StandardAero (SARO) JPMorgan Industrials Conference 2026 summary

Business performance and growth outlook

• 2026 is expected to see significant growth, with ramp programs projected to double in revenue and profitability, despite minor Q1 impacts from a Phoenix fire and government shutdown.

• LEAP and CFM56 programs are on track to reach profitability in the first half of 2026, with industrialization costs cut by 60% in 2025 and further improvements expected as technicians advance along the learning curve.

• Capacity investments in Dallas and San Antonio are fully utilized, with ongoing improvements in technician efficiency expected to create additional capacity and support future growth.

• The majority of LEAP work is under long-term agreements, with a global customer base and strong demand from the Middle East and Asia.

• Cash conversion is guided at 75% for 2026, with expectations to reach 80–100% later in the decade as ramp program cycles mature and capital expenditures normalize.

Operational strategy and risk management

• Capacity is managed to balance both heavy (PRSV) and lighter (CTEM) work scopes, ensuring flexibility for customers within long-term agreements.

• Contract risk is primarily on labor, with protections against material cost escalation and work scope creep, especially in new LEAP contracts.

• Margin improvement is driven by operating leverage, productivity, and continuous improvement across 41 platforms, with mature programs like CF34 and turboprops providing stable, accretive margins.

• Parts availability, especially in casting and forging, remains a key challenge, addressed by expanding the repair portfolio and insourcing more component repairs.

• Retirements of mature engines like CFM56 are seen as opportunities for used parts sales, MRO events, and asset exchanges, supporting profitability.

Component repair and M&A activity

• Component repair is a high-margin business (approx. 30% EBITDA), with insourced repairs up 16% in 2025 and further capital allocated for new repair development in 2026.

• Expansion of the repair catalog includes both in-sourced and new repairs, even for platforms not serviced on the MRO side, such as GTF engines.

• M&A remains active, with a robust environment for acquiring both small and large component repair businesses, including military-focused operations.

• The ATI acquisition has been highly successful, expanding both commercial and military repair capabilities, notably for the J85 engine.

• Near-term challenges in component repair include a Phoenix facility fire and government shutdown, impacting Q1 but expected to be temporary, with growth and margin expansion still anticipated.