One interesting issue that the AWIN story didn't dive into is the volatility in the components arena. Already naturally fragmented due to its diversity, a mix of positive and negative signs seems to be adding to everyday challenges.
On the plus side, de-stocking has significantly declined, meaning parts purchasing will be "normalized" with demand, Canaccord analyst Ken Herbert writes. Meanwhile, the increased availability of surplus parts (more on that here and here) is challenging everyone that supplies new parts.
Consistent with the industry, the outlook softened for the component segment, but we would highlight that the drop here from the Q2/13 outlook was more pronounced for component MRO shops. We did not see any significant difference geographically between the component responses, but we believe many aspects of the component industry are facing more pricing pressure in 2014, and the impact of used surplus material (USM) is going to continue to be a headwind for many component parts suppliers.
Canaccord pegs the used serviceable market at $3 billion per year, and growing at a rate that costs the overall aftermarket parts market 1% annually.