What Makes AAR a Neutral Pick? Goldman Sachs' January Coverage Reveals Mixed Market Signals

AAR Corp (NYSE: AIR) has become the subject of renewed analyst scrutiny, as major financial institutions weigh conflicting signals about the aerospace and defense supplier’s near-term prospects. Goldman Sachs recently initiated coverage of AAR in late January 2026, assigning a Neutral rating that reflects both cautious optimism and tangible downside risks.

Goldman Sachs Assigns Cautious Outlook for AAR Stock

The bank’s analysis suggests a measured approach to AAR, with analysts projecting modest downward pressure in the near term. As of mid-January, the consensus one-year price target sits at $101.45 per share, representing approximately 3.98% downside from the stock’s then-closing price of $105.66. Price forecasts across the analyst community range considerably—from a conservative $81.11 to a bullish $117.60—highlighting the divergence in views about AAR’s trajectory.

Beyond the equity valuation, Goldman Sachs’ report noted that AAR’s projected annual revenue is expected to decline 23.47% to approximately $2,271 million, while non-GAAP earnings per share (EPS) are anticipated at 5.68. This revenue contraction suggests near-term headwinds, though the EPS projection indicates continued profitability despite the top-line pressure.

Institutional Fund Sentiment Splits on AAR

Market participants are displaying mixed enthusiasm about AAR’s prospects. Currently, 584 funds and institutions maintain reportable positions in the stock—an increase of 14 investors or 2.46% in the last quarter. The average portfolio allocation dedicated to AAR across all institutional holders is 0.21%, up 6.96% from the prior period. Total shares held by institutions climbed 6.23% to reach 48,082,000 shares over the three-month span.

The options market offers its own perspective: AAR’s put/call ratio stands at 0.68, suggesting that traders and hedgers are taking a relatively bullish stance on the stock despite the Neutral rating. This reading indicates that call purchases are outpacing put purchases—a dynamic typically associated with cautious optimism rather than outright bearishness.

Major Shareholders Recalibrate AAR Positions

Individual institutional actors are revealing divergent strategies. iShares Core S&P Small-Cap ETF (IJR), the largest shareholder on record, controls 2,117,000 shares representing 5.42% ownership—down 3.30% from its prior filing of 2,187,000 shares. Yet despite reducing the absolute position, the ETF actually increased its portfolio weight allocation in AAR by 17.92% over the quarter, suggesting strategic rebalancing rather than conviction-driven selling.

Wellington Management Group, another major holder, now owns 1,487,000 shares (3.81% of the company), up significantly from 609,000 shares in its prior filing—a 59.07% increase. However, the firm paradoxically decreased its portfolio allocation to AAR by 56.54% in the same quarter, indicating that the absolute share count grew but represents a smaller slice of its overall portfolio.

Earnest Partners maintains 1,423,000 shares (3.65% ownership), a slight 5.07% reduction from 1,496,000 shares previously held. The firm still managed to increase its AAR allocation by 19.39% when measured as a percentage of portfolio weight.

Westwood Holdings Group holds 1,192,000 shares (3.05% stake), marking a 30.53% decrease from its prior 1,555,000-share position. Its portfolio allocation shrank 0.97% quarter-over-quarter. Meanwhile, Franklin Resources owns 1,154,000 shares (2.96% ownership), having increased from 843,000 shares—a 26.97% gain—but simultaneously cut its portfolio allocation by 72.01%, the sharpest proportional reduction among major holders.

What This Means for AAR Investors

The landscape suggests AAR faces a near-term valuation correction risk offset by solid institutional interest and mildly bullish options positioning. The Neutral rating from Goldman Sachs provides a reasonable middle ground for investors seeking to understand AAR’s intermediate outlook.