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Air Lease (AL) Up 4.3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Air Lease (AL). Shares have added about 4.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Air Lease due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Air Lease Misses Earnings Estimates in Q2

Air Lease's earnings of $1.10 per share, missed the Zacks Consensus Estimate of $1.27. Quarterly revenues totaled $471.4 million, falling short of the Zacks Consensus Estimate of $487.7 million. The top line, however, improved 18.5% year over year. This year-over-year improvement can be primarily attributed to higher revenues from the rental of flight equipment.

Notably, rental of flight equipment revenues, accounting for bulk (98.4%) of the top line, increased 17.9% from the year-ago figure. Also, aircraft sales and trading activity revenues surged more than 73% to $7.52 million. Total expenses rose 24.1% to $310.86 million, thanks to higher interest expenses, and selling, general and administrative expenses.

Furthermore, this Los Angeles, CA-based company took delivery of 16 aircraft from its order book in the second quarter apart from acquiring one aircraft from the secondary market. This reflected approximately $1.6 billion investment in aircraft. Air Lease exited the period with a total fleet size of 754 (including owned fleet of 297). Its total fleet size was 758 (including owned fleet of 275) at the end of 2018. Due to the ongoing groundings of Boeing 737 MAX groundings, the company announced that it will not take delivery of MAX planes in the remainder of 2019.

Following the MAX groundings and delivery delays by Airbus, Air Lease lowered its 2019 projection pertaining to aircraft investments for the second time after May For the full year, the company now expects aircraft investments of approximately $5.1 billion.

Dividend Update

Air Lease’s board cleared a quarterly cash dividend of 13 cents per share, payable Oct 4, 2019, to its shareholders of record as of Sep 15.

Liquidity

Air Lease exited the second quarter with cash and cash equivalents of $264.1 million compared with $300.13 million at the end of December 2018. As of Jun 30, 2019, the company had $12.85 billion of debt financing, net of discount and issuance costs compared with $11.54 billion as of Dec 31, 2018.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Air Lease has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Air Lease has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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