![]() General assumptions include: XYZ firm would have been able to purchase the securities recommended by the model and the markets were sufficiently liquid to permit all trading. Backtested results are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. Backtested performance is not an indicator of future actual results. However, even in the unlikely event of a full write-off of the notes receivable balance, this would only reduce revenues by ~8%, which is a material, but not insurmountable, amount.Disclaimer: The TipRanks Smart Score performance is based on backtested results. In addition, most of these provisions are related to "Category C" airlines, which are the weakest airline customers in AerCap's fleet. With the market in recovery mode, it is a bit surprising to see the level of additional provisions increase by a material amount. While AerCap Holdings N.V.'s balance of notes receivable decreased by $130 million year-over-year, the credit loss provision for notes receivable nearly tripled, from $41 million at YE 2021 to $111 million at YE 2022. However, it will be interesting to monitor these amounts and see if they stay elevated as a result of some of the lease renegotiation from bankruptcies of Aercap's customers during the past few years. Much of this was likely due to the recognition of maintenance revenue amounts under leases of aircraft that were lost in the Russia-Ukraine conflict. These amounts surged from ~$25 million in 2021 to nearly $500mm in 2022. Maintenance rights expenses and liability releases Their CFO commented that they believe they may need to secure up to $6-7 billion in funding from the markets in 2023, so every bit of savings will help. When combined with their strong profits and sizable unencumbered asset base, it may also help some banks get more comfortable with lending to AerCap on an unsecured basis. These credit upgrades will help in allowing the company to achieve the most competitive cost of capital in the bond market. was upgraded by Moody's to a Baa2 rating. Credit ratings upgradeĪerCap Holdings N.V. Over the next 4-5 years, I estimate that AerCap will be in a position to potentially repurchase between a third and half of outstanding shares, which will be substantially accretive to shareholders. ![]() Regardless, to the extent that AerCap trades higher than book value, a dividend could be another useful way for the company to reward shareholders. For the sake of conservatism, I will stick with the book value in the financial statements, without giving credit to the discount paid for GECAS. There's a reasonable argument to be made that, due to the significant discount at which GECAS was purchased, AerCap's true book value is closer to $80 per share today. AerCap's playbook of selling assets at a premium to book value to buy shares at a discount is not quite as powerful now only because the shares are currently trading right about at book value. However, I suspect it is likely that they will authorize another program once this one expires. could have gone for an even bigger buyback plan than they opted to. Based on the excess capital generation of the business, there's an argument that AerCap Holdings N.V. I had previously been assuming around $1 billion in annual share repurchases, so while this is not as big of a plan as I thought, it is a positive sign nonetheless. Management also announced, as I expected, a resumption of its share repurchases, with a $500 million authorization up to the end of Q3. I forecast that AER will be closer to $7.50 - $8.00 in adjusted EPS excluding asset sale gains, and $8.50 - $9.00 when including these amounts. They also guided towards $2.5 billion in asset sales for the full year, and assuming a similar profit margin to what AerCap stock has achieved historically, this would add another $0.60 - $0.85 in after-tax EPS in 2023. management guided towards a target of adjusted EPS of $7.00 - $7.50 per share, excluding gains on sales. I will tackle these items in no particular order. They reported Q4 earnings yesterday, and there was a lot to be gleaned from their results, much of which was supportive of the shares. ![]() ![]() ( NYSE: AER) right after their third-quarter earnings were released, outlining my bullish outlook for the company and what I expected in the months to come. I initially wrote about AerCap Holdings N.V.
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