BofA warns Fed risks policy mistake with early rate cuts
On Thursday, Goldman Sachs resumed coverage on AerCap Holdings (NYSE: AER), issuing a Buy rating and setting a 12-month price target of $119.00. The firm's analysis suggests a positive outlook for the aircraft leasing company, expecting an expansion of net spread in 2025 and beyond. This forecast is based on anticipated improvements in lease mix due to new deliveries and the cycling off of pandemic-era leases.
AerCap's net spread, the difference between income from leasing aircraft and the cost of financing these assets, had stabilized in the first quarter of 2024 after experiencing lower levels than before the pandemic. Goldman Sachs predicts this stabilization is a precursor to growth, which will be supported by a combination of factors including strong gains on sales and further share repurchases.
The investment bank's forecast includes a 14% growth in book value per share and a 12% increase in earnings per share (EPS). These projections are driven by the company's robust gains on sales, which have been significantly higher than historical levels, and its strategic share repurchases.
Goldman Sachs underlines two key reasons for their optimistic Buy rating on AerCap Holdings. First, there is strong demand for the company's diversified portfolio of aviation assets. Second, the continuation of gains on sale is expected to drive substantial shareholder returns, reinforcing the positive outlook for the stock.
In other recent news, AerCap Holdings NV has been in the spotlight due to its robust financial performance and raised full-year earnings guidance. The aircraft leasing company reported an adjusted net income of $463 million, or $2.41 per share, and a record operating cash flow of $5.6 billion over the past twelve months. AerCap also declared a quarterly dividend of $0.25 per share and announced a new $500 million share repurchase authorization.
In the light of these recent developments, Citi reaffirmed its Buy rating on AerCap and raised the price target to $117.00 from $113.00. The firm adjusted its earnings per share estimates for AerCap to $11.63 for the current year, up from the previous estimate of $11.40, and projected $13.18 and $14.28 for 2025 and 2026, respectively.
Despite delivery delays from Boeing (NYSE:BA) and Airbus impacting its fourth-quarter delivery expectations, AerCap maintains a strong liquidity position with approximately $23 billion in sources and a leverage ratio of 2.4 to 1. The company's resilience is further reflected in its decision to reduce its exposure to the Chinese market from 21% to 13.5% over three years. AerCap expects its robust performance to continue into 2025, driven by inflation in asset values and effective maintenance management.
InvestingPro Insights
AerCap Holdings' (NYSE: AER) financial metrics and market performance align with Goldman Sachs' positive outlook. According to InvestingPro data, AerCap's P/E ratio stands at 7.3, indicating the stock may be undervalued relative to its earnings. This is further supported by an InvestingPro Tip highlighting that AER is trading at a low earnings multiple.
The company's impressive gross profit margin of 57.97% for the last twelve months ending Q3 2024 reflects strong operational efficiency, which could contribute to the anticipated net spread expansion mentioned in the article. Another InvestingPro Tip notes AerCap's "impressive gross profit margins," reinforcing this strength.
Additionally, AerCap's year-to-date price total return of 29.2% suggests investor confidence in the company's performance, aligning with Goldman Sachs' bullish stance. The stock's current price of $95.25 is 95.56% of its 52-week high, indicating strong momentum.
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for AerCap Holdings, providing deeper insights into the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.