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Why AerSale Stock Fell Today

By Lou Whiteman – Nov 10, 2021 at 4:22PM

Key Points

  • AerSale had been a strong performer since making its public debut last December, but lost altitude on Wednesday following its earnings report.
  • The lightly-followed company reported soft revenue and lowered full-year guidance due to the timing of aircraft monetization.

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Uncertain guidance on aircraft monetization has the stock taking a break from rally mode.

What happened

Used-plane repair and salvage specialist AerSale (ASLE -1.21%) was one of the more under-the-radar companies to go public in the last year via a merger with a special purpose acquisition company (SPAC). But the spotlight was directly on the company today after its earnings report. Shares of AerSale were down 19.2% at the close Wednesday on investor disappointment over guidance.

So what

AerSale specializes in the sale, lease, and exchange of used aircraft, engines, and components. It provides a range of maintenance, repair, overhaul, and replacement services for commercial aircraft operators. The company went public last December, merging with a SPAC called Monocle Acquisition.

On Tuesday evening, AerSale reported third-quarter earnings of $0.22 per share on revenue of $73.3 million, a split result compared to the one analyst covering the stock, who expected $0.20 per share in earnings on revenue of $94 million.

A plane engine under repair.

Image source: Getty Images.

The company booked $27.4 million in flight equipment sales in the quarter, made up of three aircraft and one engine.

The markets seemingly were focused on AerSale's lowered guidance. The company said it now expects total 2021 sales of $320 million to $340 million, down from previous guidance for $340 million to $360 million, due to the timing of future flight equipment sales.

Much of that is tied to AerSale's fleet of 21 Boeing 757s that the company is beginning to monetize through freight conversions and sales. The pace of those sales and others are somewhat affected by Federal Aviation Administration certification, which creates uncertainty about the pace of any deals.

Now what

In theory, AerSale should be set up well to compete in this environment. The pandemic has made airlines reluctant to commit to massive new aircraft purchases, creating significant demand for spare parts, including what can be salvaged from older aircraft. At the same time, the airlines are downsizing their fleets by selling older planes, giving AerSale a chance to buy up assets on the cheap and sell them into the red-hot freight market.

But the business has a lot of moving parts, and as we saw in the quarter, timing is  uncertain at best due to a range of factors. Coming into the report, AerSale had been a strong performer, with the stock up more than 60% year to date. Given the expectations and the mixed results, it is no surprise the rally took a breather on Wednesday.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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