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Why Is Air Lease (AL) Down 13.6% Since Last Earnings Report?

Zacks Equity Research
CoreLogic (CLGX) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

It has been about a month since the last earnings report for Air Lease (AL). Shares have lost about 13.6% 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 drivers.

Air Lease Q4 Earnings Beat, Rise Y/Y

Air Lease's earnings (excluding 41 cents from non-recurring items) of $1.65 per share surpassed the Zacks Consensus Estimate of $1.35. The bottom line also improved year over year.

Quarterly revenues of $450 million lagged the Zacks Consensus Estimate of $457.6 million. However, the metric increased 12.9% year over year, primarily owing to consistent fleet growth.

Meanwhile, rental of flight equipment revenues, accounting for bulk (97.1%) of the top line climbed 15.5% from the year-ago figure. However, aircraft sales and trading activity revenues dropped 35.5% to $12.89 million. Also, total expenses rose 19.4% to $277.95 million, thanks to higher interest expenses.

During the reported quarter, this Los Angeles, CA-based company received a delivery of 12 planes and sold five aircraft, thereby exiting the period with a fleet of 275 in its portfolio, up from 244 at the end of 2017. The average fleet net book value totaled $15.7 billion compared with $13.3 billion in December 2017. The company’s efforts to bolster its fleet are impressive. The aforementioned purchase of 12 new aircraft is anticipated to add to its earnings growth in the next quarter as well.

Dividend Update

The company’s board cleared a quarterly cash dividend of 13 cents per share, payable Apr 10, 2019 to shareholders of record as of Mar 20.

Liquidity

Air Lease exited the fourth quarter with cash and cash equivalents of $300.13 million compared with $292.2 million at the end of December 2017. As of Dec 31, 2018, the company had $11.54 billion of debt financing, net of discount and issuance costs, compared with $9.7 billion as of Dec 31, 2017.

The company generated $1.25 billion of cash flow from operating activities during 2018 compared with $1.06 billion in 2017.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.69% due to these changes.

VGM Scores

At this time, Air Lease has a nice Growth Score of B, however its Momentum Score is doing a bit 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 A. 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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