A month has gone by since the last earnings report for Air Lease (AL). Shares have added about 43.1% 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 catalysts.
Air Lease's Q1 Earnings Miss Estimates
Air Lease’s first-quarter 2020 earnings of $1.17 per share missed the Zacks Consensus Estimate by 11 cents. Also, the bottom line declined 4.9% on a year-over-year basis due to increase in operating costs. Quarterly revenues of $511.4 million missed the Zacks Consensus Estimate of $545.2 million, but increased 9.73% on a year-over-year basis.
This year-over-year uptick can be primarily attributed to 9% increase in revenues from the rental of flight equipment. Notably, rental of flight equipment revenues contributed 97% to the top line.
Revenues from aircraft sales, trading activity and other sources surged 42.5% to $14.7 million in the reported quarter. Total expenses rose 16.7% to $339.7 million due to higher interest expenses, selling, general and administrative costs as well as other factors.
During the March-end quarter, the carrier received delivery of eight aircraft in its fleet and purchased one aircraft from the secondary market, which represented $709 million in aircraft investments. As of Mar 31, Air Lease owned 300 aircraft in the operating lease portfolio, with a net book value of $19.2 billion. Total fleet size at the end of first quarter was 806 (including owned fleet of 300) compared with 858 (including owned fleet of 292) at 2019-end.
Thanks to the COVID-19 outbreak, the company reduced its capital expenditures in aircraft investments and is expecting to minimize aircraft sales for the rest of 2020.
In order to counter the COVID-19 impact in the financial market, Air Lease is maintaining a significant liquid position with $6.3 billion as of Mar 31, 2020.
Air Lease exited the quarter with cash and cash equivalents of $732.7 million compared with $317.4 million at 2019 end. As of March end, the company had $14.4 billion of debt financing, net of discount and issuance costs compared with $13.6 billion as of Dec 31, 2019.
Air Lease cleared a quarterly cash dividend of 15 cents per share (annualized 60 cents). The amount will be paid on Jul 9, 2020 to its shareholders on record as on Jun 5.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 36.13% due to these changes.
At this time, Air Lease has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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.
Air Lease has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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