Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



3 Takeaways From Air Lease's Earnings

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

If you're looking for a well-managed, high-growth company for your portfolio, then you may want to take a hard look at Air Lease (NYSE: AL  ) . The company buys aircraft and leases them to airlines around the world that need new aircraft but may not be in a position to buy them themselves. It can be a very profitable business when executed correctly. Interested? The air lessor announced second-quarter earnings not too long ago, which can serve as a great starting point for your research into the company. Here are three things investors can learn from the latest financial results.

1. Growing and growing and growing
Air Lease is growing everywhere you look. Year over year, the company grew sales 31%, net income 53%, cash provided from operations by 6%, and diluted EPS by 46%. The company even managed to increase its pre-tax income margin from 27.7% a year ago to 31.9% in the most recent quarter. That is a scary trend, but what is driving that growth? Is it sustainable?

It all comes down to the company's fleet. By expanding its stable of aircraft, Air Lease is better able to serve its customers, expand its customer base, and penetrate new markets. That, of course, drives the top and bottom lines for investors. Consider how the company has steadily added new aircraft over the years and how it plans to continue doing so for the foreseeable future.

Historical data presented in orange, future growth with expected orders presented in blue. Source: Air Lease SEC Filings.

Air Lease is currently expecting to add another 24 aircraft in 2017 and up to 213 aircraft in subsequent years. Anything can happen in the years ahead and the market could certainly change, so I wouldn't get too excited about what happens after 2017. The important thing to realize is that management is focused on the long-term, which makes us Fools smile.

2. Focus on growth opportunities
Growing your fleet won't take you very far if you cannot capitalize on the market opportunities available, the largest of which are in Asia and Europe. Leasing aircraft is a popular practice in Asia, where airlines are faced with challenges including keeping up with population growth and a lack of access to large amounts of capital needed to buy new aircraft. Meanwhile, Europe is becoming a major destination for air lessors with new fleets due to the continent's focus on efficiency and strict emissions standards.

Good news: Air Lease is betting heavily on both regions and recently increased its exposure to Asia.


Fleet % of Net Book Value, 2Q13

Fleet % of Net Book Value, 4Q12







Central & South America, Mexico



Middle East & Africa



Source: Air Lease press release.

Is the company overexposing itself to just two regions? That is certainly a concern investors will need to weigh for an investment, although I believe the growth trends remain intact at the moment. It isn't the only risk to consider, however.

3. Lots of debt and competition
Becoming a major player in the aircraft leasing business requires a substantial amount of debt. It is a necessary evil of the industry, but in a worst-case scenario, it could become a major liability. For instance, Air Lease has pledged 52 aircraft in its fleet as collateral against its secured debt obligations. That is down from 55 at the end of 2012, but it still represents about 36% of the net book value of its total fleet. Of course, industry peers are in the same boat to pay for their large debt holdings.


Market Cap

Debt-to-Assets, 2Q13

Air Lease

$2.8 billion


Aircastle (NYSE: AYR  )

$1.3 billion


AerCap Holdings (NYSE: AER  )

$2.1 billion


Source: Google Finance and company press releases.

Aircastle has 158 aircraft in its fleet and also relies heavily on Asia and Europe. However, it has actually lost one of its aircraft since the end of last year, while Air Lease has added 19 in the same time period. Additionally, Aircastle has 67 customers in 36 countries. That's impressive, but Air Lease bests it again with 78 customers in 44 countries.

AerCap, on the other hand, boasts a fleet of 227 aircraft and is also growing at an impressive clip. It raised adjusted EPS to a record high in the first half of 2013, which was 29% higher than the prior-year period. It will take some time for Air Lease to overtake the company in terms of pure fleet size, but I think the former's growth trajectory is more favorable to long-term investors.

Foolish bottom line
I think Air Lease is a great growth company for any portfolio, despite the fact that it flies under most investing radars (no pun intended). It expects to grow its fleet by 76% from the end of June to the end of 2017. You may not be able to count on the additions penciled in after that point, but you can bet that management won't be throwing in the towel on future growth opportunities. I'll be looking to add shares to my portfolio in the next few quarters. 

Are you unconvinced by Air Lease? You aren't alone. Warren Buffett has claimed that investing in airlines is a surefire way to lose your hard-earned cash. But two airlines are breaking all the rules by keeping costs low and avoiding direct competition -- leading to enviable profits. Click here to learn how these two airlines are leading a revolution in the industry and discover whether they can keep delivering big gains for shareholders!

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2594045, ~/Articles/ArticleHandler.aspx, 9/28/2016 11:40:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 hour ago Sponsored by:
DOW 18,339.24 110.94 0.61%
S&P 500 2,171.37 11.44 0.53%
NASD 5,318.55 12.84 0.24%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/28/2016 4:02 PM
AL $28.17 Up +0.62 +2.25%
Air Lease CAPS Rating: *****
AER $38.04 Up +1.02 +2.76%
AerCap Holdings CAPS Rating: ***
AYR $20.24 Up +0.61 +3.11%
Aircastle CAPS Rating: *****