What happened

Aircraft maintenance services provider AerSale (ASLE 3.46%) delivered a decent quarter, but investors were disappointed by the cautious commentary about 2023. Shares of AerSale traded down as much as 17% on Tuesday morning after the market was forced to recalibrate expectations for the current year.

So what

AerSale, an owner of used aircraft, spare engines, and other components, earned $0.23 per share on revenue of $95.1 million in the fourth quarter. The earnings beat Wall Street's $0.20-per-share expectation, but sales were short of the $123 million forecast. The revenue figure was down from the $116.8 million reported in the fourth quarter of 2021.

The culprit was flight equipment sales, which tend to occur at irregular intervals and can be hard to predict. Flight equipment revenue was $51.4 million in the most recent quarter, down from $73.1 million in the prior-year period.

"While our results were unevenly distributed throughout the year, our full-year results came in within our expected range and marked a record result for the company," CEO Nicolas Finazzo said in a statement.

And revenue is not going to accelerate as much as hoped in the quarters to come. AerSale is forecasting 2023 revenue of between $460 million and $490 million. Even at the top end, that is below the $495 million consensus.

Now what

Investors are also likely reacting to a slowed timetable for approval of AerSale's AerAware product, which is designed to improve pilot visibility in low-visibility conditions. Back in November, AerSale said it hoped the Federal Aviation Administration (FAA) would begin flight certification testing by year's end, which could suggest possible orders by the end of the first quarter if all goes well.

On the company's conference call, management said FAA certification flight testing began in February, and so far, two of the five stages are complete. The tests could be done by April, weather permitting, but the company said it included no AerAware sales in its guidance.

This software is a major potential catalyst for AerSale, as it is expected to sell for upward of $400,000 with 50%-plus gross margin. So investors are watching closely. If things go to plan with AerAware and it turns out AerSale is being overly conservative in its guidance, this drop could turn into a buying opportunity.