A month has gone by since the last earnings report for Air Lease (AL). Shares have lost about 8.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Air Lease due for a breakout? 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 Q3 Earnings & Revenues Beat
Air Lease delivered better-than-expected results in the third quarter of 2018. This Los Angeles, CA-based company’s earnings (excluding 9 cents from non-recurring items) of $1.41 surpassed the Zacks Consensus Estimate of $1.26. The bottom line was driven by a reduced tax rate as well as higher revenues.
Quarterly revenues of $450.7 million came above the Zacks Consensus Estimate of $442.3 million. The metric also improved 19.6% year over year, primarily owing to consistent fleet growth and a 61.7% surge in aircraft sales, trading and other revenues. Meanwhile, rental of flight equipment revenues climbed 17.6% from the year-ago figure.
Total expenses rose 21.9% to $271.32 million, thanks to higher interest expenses, stemming from a rise in average debt balances as well as higher selling general and administrative expenses.
During the quarter, the company received a delivery of seven planes and sold 10 aircraft, thus exiting the period with 268 in its portfolio, up from 244 at the end of 2017. The average fleet net book value totaled $15.1 billion compared with $13.3 billion in December 2017. We are impressed by the company’s efforts to bolster its fleet. The aforementioned purchase of seven new aircraft is anticipated to add to its earnings growth in the next quarter as well.
The company’s board announced a 30% dividend hike to 13 cents per share from the previously declared 10 cents, payable Jan 9, 2019 to shareholders of record as of Dec 13, 2018.
Air Lease exited the third quarter with cash and cash equivalents of $228.5 million compared with $292.2 million at the end of December 2017. As of Sep 30, 2018, the company had $11.09 billion of debt financing, net of discount and issuance costs, compared with $9.7 billion as of Dec 31, 2017.
The company generated $870.1 million of cash flow from operating activities during the first nine months of 2018 compared with $751.64 million in the year-ago period.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Air Lease has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, 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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