Has Air Lease Remained Undefeated Against Wall Street?

Make that 11 straight quarters for beating Wall Street expectations on earnings per share for high-growth air leasing company Air Lease (AL +0.00%). It didn't beat by much, but, as I illustrated earlier this week, analysts continue to lowball expectations for the company. I suppose that can happen when industry pioneer and CEO Steven Udvar-Hazy continues to steamroll toward his goal of creating the most efficient and most profitable air leasing business in the world.

What are the latest numbers depicting the company's growth trajectory? Was there any bad news investors should know about? And what the heck was I thinking when detailing the company's plans for its fleet in previous articles? Let's dig in.

Financials
Investors can look at third-quarter financials in full by digging through the company's press release (link opens PDF), but here are the important numbers that I'm focusing on:

Source: Air Lease third-quarter earnings press release

Revenue continued to grow at a healthy clip, as net profit margin reached an all-time high on the heels of lower operating and financing costs. The improved efficiency also boosted cash flow from operating activities by nearly 40% and sent diluted EPS 28% higher compared to last year's third quarter.

Meanwhile, management noted that airline passenger traffic for the first nine months of year is up 5% globally -- exceeding global GDP growth. Air Lease's young and efficient fleet should allow it to continue to capitalize on the growing trend better than its peers. In fact, the average age of the company's fleet only increased by two-and-a-half months in the previous 12 months -- another indicator of healthy growth.

Management increased its dividend from $0.025 per share to $0.03 per share; nothing to go crazy about, but investors that hold for the long term will enjoy the power of compounding. Besides, money is much better spent on organic growth than simply forfeiting it to shareholders. Check the table above if you disagree.

Fleet updates and growth (and explaining my mistake)
Robust demand continues for the company's fleet. In fact, all aircraft, delivered or otherwise, have been leased though 2015 and the company is now beginning aircraft placements with airlines for 2016 and 2017. Additionally, none of the company's leases will expire in any year through 2017. Those two forces alone essentially assure steady growth for the next two years.

Source: SEC filings

Air Lease has already added two aircraft since the end of September, bringing the fleet total to 184 today, and expects to add 11 new aircraft before the end of the year. That means the company will best its own ambitious end-of-year fleet target for 2013 by two aircraft, to 195 total. I should take this time to correct some previous errors I've made, however.

The graphic for visualizing fleet growth has changed from my previous articles on Air Lease. That's because the company plans on maintaining a fleet of approximately 200 aircraft. Once it crosses that threshold -- which is nearly at hand -- management will look to profitably sell older assets. This will keep debt in check, maintain a young and efficient fleet, and mitigate the risk of holding onto assets longer than their useful life. It seems as if the oldest aircraft sold under this plan will still be quite young compared to industry averages, which will make it easier to find buyers.

Although I've shown bar graphs for previous graphics, investors should not expect Air Lease to hold 283 aircraft at the end of 2016. Instead, expect the company to add about 83 new aircraft while selling roughly the same number of older assets. This will not impede the company's plans for growing revenue long term, but revenue in future quarters will be realized from a combination of leases (newer assets) and aircraft sales (older assets). I apologize for overlooking this goal of management, although I have to admit it makes more sense and further protects the long term viability of the company.

Comparable competition?
Air Lease wants to be the best growth company in its industry, but how exactly did its year-over-year growth this quarter compare to its peers Fly Leasing (FLY +0.00%), AerCap Holdings (AER 0.89%), and Aircastle Limited (AYR +0.00%)?

*Reported loss of $46 million. All percentages represent comparison between 3Q13 and 3Q12. Source: Company press releases

AerCap remains the closest competitor to Air Lease in terms of youth, but isn't growing revenue as quickly. After generating $279 million in the third quarter at a growth rate of just 4%, investors have to figure Air Lease will overtake it in sales in the next few quarters.

Meanwhile, Fly Leasing and Aircastle continue to combat aging fleets. The former sold 12.3 million shares to Marubeni Corporation to raise $209 million in new capital, while Aircastle continues to take hits related to impairment charges of its older aircraft. Air Lease's business model will skirt these issue down the road while continuing to build long term shareholder value.

Foolish bottom line
The growth story continues at Air Lease and I don't see anything stopping it anytime soon. I continue to be astounded by the swiftness and execution by the current management team. There are risks, of course, such as a major economic downturn in any of the company's geographic regions or an oversupply of aircraft available for leasing. While the industry has witnessed signs of the latter, newer and more efficient aircraft -- Air Lease's entire fleet -- remain in high demand. I see the near-term and long-term stories providing a favorable opportunity for investors. If you don't add shares to your portfolio, then you should at least put it at the top of your watchlist.