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Air Lease (AL) Stock Down on Q2 Earnings and Revenue Miss

Zacks Equity Research

Air Lease Corporation AL delivered lower-than-expected earnings and revenues in the second quarter of 2019. Following the lackluster results, shares of the company declined 2.2% in after-market trading on Aug 8.

Air Lease Corporation Price, Consensus and EPS Surprise

 

Air Lease Corporation Price, Consensus and EPS Surprise

Air Lease Corporation price-consensus-eps-surprise-chart | Air Lease Corporation Quote

Earnings in the quarter under review came in at $1.10 per share, which 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.

Zacks Rank & Stocks to Consider

Air Lease carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Delta Air Lines DAL, Safe Bulkers SB and GATX Corporation GATX. While Delta and Safe Bulkers sport a Zacks Rank #1 (Strong Buy), GATX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Delta and Safe Bulkers have gained more than 6% and 13% respectively, over the past three months. Meanwhile, the long-term earnings growth rate (three to five years) for GATX is estimated at 15%.

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