Aercap,
Q2 2019 - Results
July, 31 2019
1. CONTEXT
The 2nd quarter results came out yesterday and I’ll be looking at them in a minute but first I’ll start by reading my previous analyses.
2. RESULTS
Here are the documents for the 2nd quarter:
3. POSITIVES
3.1. Lease revenue went up
Lease revenue went up by 5% due to the delivery of new airplanes and the net gain in sale of assets that was up by 53% due to the sale of 22 aircrafts for $502,4M. This means that the company sold those planes at a 18% premium to book-value.
3.2. Operating margin went up
The operating margin went up from 51% to 55%.
3.3. Net spread went up, Avrg fleet age went down and Avrg Lease Term went up
All great news..
3.4. Number of shares outstanding went down
The company still believes its own shares are cheap so it bought 3,5M shares for $169M in the second quarter which means that the company has bought them at an average price of $48 while the book value is $67.
On my latest analysis I’ve said that “as the revenue from the sale of airplanes goes down, there will be a slowdown in the share buyback program as well”. Obviously we haven’t reached that point yet.
3.5. Book value went up
Book-value went up to $67
3.6. Liquidity is higher than ever
Aercap’s liquidity ratio at 2,0x has never been so high.
3.7. Earnings per Share went through the roof
The net income went up by 30% and thanks to the share buybacks, Diluted EPS went up by 43%!!!
4. NEGATIVES
4.1. Order Book
Unfortunately the delivery of those 95 Boeing 737 Max is being postponed and no one really knows when the ban will be lifted. This hinders Aercap’s revenue but at least all of the of the industry is suffering from the same pain.
4.2. Cost of debt went up
The cost of debt went up from 4,1% to 4,3%.
5. OVERVIEW & CONCLUSION
5.1. OVERVIEW
Obviously these are great results and I had to struggle to find something negative in them. When I first wrote about Aercap back in March, the share price was at $45,2 and today, after the results came out, it stands at $54,51 for an increase of 20%.
But this doesn’t mean that the company was cheap back then and is now expensive or even fairly priced.
The Price-to-Book at the time was 0,75 while now it’s 0,84, the Price-to-Earnings was 6,6 and it’s now 7.
There are no changes to my view on the company. The company is still selling airplanes at a 18% premium to book value only to buy back shares at a 28% discount to book value. I don’t see why the stocks shouldn’t be trading at $65 or $75 today.
5.2. CONCLUSION
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