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What's in Store for Air Lease (AL) This Earnings Season?

Zacks Equity Research

Air Lease Corporation AL is slated to release fourth-quarter 2018 results on Feb 21, after market close.

In the third quarter, the company delivered impressive results, with earnings and revenues beating the Zacks Consensus Estimate. The bottom line was favored by lower tax rate and higher revenues. Also, the top line improved year over year on the back of consistent fleet expansion as well as strong growth in aircraft sales, trading and other revenues.

Air Lease has an impressive earnings surprise history. The company’s earnings surpassed the consensus mark in each of the trailing four quarters, the average being 22.8%.

Factors at Play

Air Lease is expected to perform well in the fourth quarter of 2018 on the back of strong passenger traffic. Also, the carrier’s focus on replacement market has propelled demand for the company’s aircraft. Such uptick is expected to boost the company’s top line in the to-be-reported quarter. The Zacks Consensus Estimate for fourth-quarter 2018 revenues is pegged at $458 million, reflecting a rise from $398 million in the prior-year quarter.

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Furthermore, the current tax law is a boon for Air Lease. The significant cut in corporate tax rate is likely to boost cash flow, which is expected to drive the bottom line in the to-be-reported quarter. The consensus mark for fourth-quarter 2018 earnings per share is pegged at $1.35, indicating an increase from $1.06 reported in the prior-year quarter.

Moreover, we are positive about the company’s constant efforts to expand fleet size. Air Lease stated that its fleet as of Dec 31, 2018, comprised 275 owned aircraft and 61 managed planes. Also, the company will purchase 372 new jets, scheduled for delivery through 2024. During the fourth quarter, it delivered 12 new aircraft (3 Boeing 737 MAX 8, 2 Boeing 787-9s, 4 Airbus A321neos, 2 Airbus A321ceos and 1 Airbus A330-900neo).

However, the bottom line is likely to be hurt due to high operating expenses.

We are also concerned about the company’s high debt levels. Air Lease is a highly leveraged company, indicated by the fact that the ratio of its long-term debt-to-equity (expressed as a percentage) compares unfavorably with the industry’s figure.

Air Lease Corporation Price and EPS Surprise

 

Air Lease Corporation Price and EPS Surprise | Air Lease Corporation Quote

 

Earning Whispers

Our proven model does not indicate earnings beat for Air Lease this quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as elaborated below.

Zacks Rank: Air Lease carries a Zacks Rank #2.

Earnings ESP: Air Lease has an Earnings ESP of 0.00%. The Most Accurate Estimate is at $1.35 per share, in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Investors interested in the Zacks Transportation sector may check the following companies that have the right combination of elements to beat estimates in their upcoming releases:

Azul S.A. AZUL has an Earnings ESP of +8.16% and a Zacks Rank #1.  The company will release fourth-quarter 2018 results on Mar 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

Frontline Ltd. FRO has an Earnings ESP of +4.17% and a Zacks Rank #1. The company will release fourth-quarter 2018 results on Feb 28.

GOL Linhas Aéreas Inteligentes S.A. GOL has an Earnings ESP of +17.07% and a Zacks Rank #3. The company will release fourth-quarter 2018 results on Feb 28.

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Gol Linhas Aereas Inteligentes S.A. (GOL) : Free Stock Analysis Report
 
Air Lease Corporation (AL) : Free Stock Analysis Report
 
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AZUL SA (AZUL) : Free Stock Analysis Report
 
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