Freedom Broker analysts see 35% upside potential in TAT Technologies shares

Freedom Broker experts maintained a “Buy” recommendation on TAT Technologies (TATT) shares despite a slight cut in the target price. Following a strong second quarter, a recovery in auxiliary power unit (APU) deliveries, and growth in the record-high backlog, analysts estimate the fair value of the shares at $54, implying upside potential of about 35% from the current price of $39,6.

TAT Technologies bets on a recovery in deliveries and strong demand

TAT Technologies is a supplier of products and services for commercial and military aviation and ground defense. The company provides maintenance and repair of aircraft components, including APUs, heat exchangers, and landing gear, and also manufactures related systems and parts.

According to Freedom Broker analysts, the second-quarter results were solid even excluding the one-off impact from catching up on previously delayed APU deliveries and the sale of a minority stake. The key positive factor, the analyst says, is expanded cooperation with the Honeywell International division focused on developing and manufacturing avionics, Honeywell Aerospace. This summer, TAT became the sole global authorized distributor of spare parts for the auxiliary power unit platform.

At the same time, analysts warn that the strong second-quarter momentum partly reflects a rebound after supply-chain disruptions in the first quarter. Therefore, such a high growth pace should not be expected to repeat in the coming quarters.

Target is $54, and in a bullish scenario — $65

Freedom Broker slightly lowered its target price for TAT Technologies—from the previously set level to $54—while maintaining a “Buy” recommendation. The adjustment is primarily due to reduced confidence that the company will be able to close at least one M&A deal by the end of 2026.

The base case implies upside potential of about 35% versus the current price of $39,6. The target price is based on estimates of the company’s adjusted 2027 EPS and EBITDA using P/E and EV/EBITDA multiples.

TAT Technologies revenue rose by nearly 23%

In the second quarter of 2026, TAT Technologies revenue totaled $52,9 million, up 22,8% year over year. Results for the first half showed growth of 10,4%, to $94,1 million.

Quarterly gross profit increased by 23% to $13,3 million, and operating profit rose by 26,8% to $5,6 million. Adjusted EBITDA was $7,4 million versus $6,1 million a year earlier, while the EBITDA margin held at 14%.

Net income reached $8,1 million versus $3,4 million in the second quarter of 2025. However, this figure includes a one-off gain of $4,3 million following the sale of a minority stake in an unconsolidated company. Excluding this effect, adjusted net income was $4,66 million, up 35,2% year over year, and adjusted diluted earnings per share were $0,35.

Operating cash flow was negative at $0,6 million, compared with a positive $6,9 million a year earlier. The main reasons were growth in accounts receivable and a strategic increase in inventories.

APUs were the key driver of the quarter

The most notable recovery occurred in APU (Auxiliary Power Unit) operations—these are services for maintenance and overhaul of aircraft power units. Improved parts availability enabled the company to complete and ship work that had previously been delayed. APU revenue in the first half rose 22,2% year over year. Management reported that the acute component shortage from OEM suppliers (manufacturers of parts and components), which affected first-quarter results, had been resolved. 

Another positive factor was the expansion of cooperation with Honeywell Aerospace. TAT received the status of sole authorized distributor of spare parts for the 331-200/331-250 APU platform.

According to Freedom Broker, the direct financial impact from Honeywell distribution will likely be moderate. Analysts estimate the potential annual revenue for this business line at roughly $5 million, while emphasizing that this estimate has not yet been confirmed by the company. The main value of the agreement lies in its strategic potential and the expansion of TAT’s presence in the APU market.

Backlog reached a record $615 million

TAT Technologies’ order backlog and long-term agreements as of June 30 reached approximately $615 million versus $580 million at the end of the first quarter. In analysts’ view, this figure provides the company with good visibility into future revenue and confirms strong demand for its services.

At the same time, most new contracts are multi-year, so the entire backlog will not be converted into revenue in the coming quarters. Freedom Broker estimates that the main impact of the new agreements will be spread over a three-to-five-year horizon.

Supply issues did not change the positive view

In the first quarter of 2026, TAT Technologies faced disruptions in component supplies from certain OEM manufacturers, which prevented part of the orders from being completed and shipped during the reporting period. Revenue fell 2,4% year over year to $41,1 million, operating profit declined 28,4% to $3 million, and adjusted EBITDA decreased 15,5% to $4,9 million.

At the same time, weak financial results did not reflect lower demand: the backlog and long-term agreements reached a record $580 million, up about 35% year over year. Freedom Broker expected that once supplies normalized, the company would be able to realize pent-up demand in the second and subsequent quarters, and against this backdrop, in May analysts reaffirmed their “Buy” recommendation and raised the target price to $60.

Not an individual investment recommendation.