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On Tuesday, Citi analyst Stephen Trent (NSE:TREN) updated the investment firm’s outlook on Air Lease Corporation (NYSE:AL), shifting the rating from Neutral to Buy and substantially increasing the price target from $45.00 to $68.00. The revision comes as Air Lease, currently trading at an attractive P/E ratio of 9.2 with a market capitalization of $6.4 billion, adopts a new capital allocation strategy reminiscent of industry peer AerCap, focusing on shareholder value through potential share buybacks and acquisitions.
The change in strategy marks a departure from Air Lease’s traditional approach of organic growth through direct purchases from aerospace manufacturers. Trent noted that the company’s management has indicated a readiness to explore these new avenues now that its debt-to-equity ratio has achieved the targeted 2.5 times, which InvestingPro data confirms at precisely 2.53x. The company maintains impressive gross profit margins of 58.5%, suggesting strong operational efficiency.
Despite the recent rally in Air Lease’s shares, which has pushed the stock near its 52-week high of $57.80, Citi’s analysis suggests that there is still room for the company to make up ground lost in comparison to its competitors like AerCap and Fortress Transportation (NASDAQ:FTAI) and Infrastructure Investors LLC (FTAI). Trent acknowledges that Citi’s upgrade comes after a significant uptick in Air Lease’s stock performance but sees potential for further gains. InvestingPro analysis reveals 12 additional investment insights and key metrics that could help investors make more informed decisions about AL’s potential.
The upgrade and price target adjustment reflect a confidence in Air Lease’s new direction and its potential to enhance shareholder returns, supported by its 12-year track record of consecutive dividend increases. The new price target of $68.00 represents a significant increase and suggests that Citi sees substantial upside for the company’s stock.
In other recent news, Air Lease Corporation has reported significant financial results that have caught the attention of investors. The company announced first-quarter 2025 earnings per share of $1.51, significantly surpassing the analysts’ forecast of $0.89. Revenue also exceeded expectations, reaching $738 million, driven by strong rental and aircraft sales. This strong performance led TD Cowen to raise its price target for Air Lease to $55, maintaining a Buy rating, following the earnings release that outperformed both their and the consensus estimates.
Air Lease’s robust sales and trading revenue, particularly from aircraft sales, contributed to the earnings beat. The company reported $93 million in revenue from aircraft sales and trading, well above the anticipated $72 million. However, expenses were higher than expected, with a notable $17 million retirement-related payout to Executive Chairman Steven Udvar-Házy contributing to the increase. Despite these higher expenses, analysts from TD Cowen viewed the results positively, reflecting confidence in Air Lease’s financial health.
Additionally, Air Lease has outlined an optimistic outlook for 2025, with plans for $3-3.5 billion in new aircraft deliveries. The company is also exploring various capital allocation strategies, including potential share repurchases and growth opportunities. Analysts have noted that lease rates are trending higher, driven by strong global demand for air travel, which could benefit Air Lease in the coming years.
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