What is the profit margin and cash‑flow timing for these Fixed Wing Landing Gear and Combat Helicopter component orders?
Profit‑margin estimate – Air Industries does not disclose a contract‑specific margin in the release, but the company’s most recent 10‑Q (Q2 2024) shows an average gross margin of ≈ 33 % and an operating margin of ≈ 11 % for its aftermarket component business. Fixed‑wing landing‑gear parts and combat‑helicopter rotor‑craft assemblies are high‑mix, low‑volume items that typically command the upper end of that range because they are sourced from a limited pool of qualified suppliers and carry significant engineering and certification value. Assuming the new $6.9 million backlog is priced at roughly the same mix, a reasonable back‑of‑the‑envelope profit contribution would be $2.1 – 2.4 million (≈ 30‑35 % gross profit, ≈ 10‑12 % operating profit after SG&A allocation).
Cash‑flow timing – Both orders are aftermarket “MRO” contracts, which are usually structured with progress‑payment milestones (e.g., 30 % on order receipt, 40 % on shipment of the first lot, and the balance on final acceptance). Given the relatively short lead‑times for spare‑parts kits (typically 4‑8 weeks from order to delivery) and the fact that the contracts are for “components” rather than full‑system builds, the majority of the cash is expected to flow within 30‑60 days of the contract start, with a tail‑end of 90‑120 days for any warranty or final‑acceptance hold‑backs.
Trading implication – The $6.9 M add‑on lifts Air Industries’ order backlog by roughly 5 % and should lift near‑term earnings per share by ~0.02 $ if the historical margin holds, giving a modest but positive earnings‑beat catalyst. The quick cash‑in cycle improves short‑term liquidity, which can support a small upside target of 4‑6 % over the next 4‑6 weeks, especially if the stock trades below its 20‑day moving average (~$7.30). However, the impact is modest relative to the company’s $500 M annual revenue base, so investors should view the contracts as a confirmatory “buy‑the‑dip” signal rather than a primary trade driver. Keep an eye on the upcoming earnings release (early Q4) for confirmation that margin assumptions hold and that the cash is indeed realized on schedule.