On Wednesday, BMO (TSX:BMO) Capital Markets adjusted its price target for Air Lease Corporation (NYSE:AL) shares, a commercial aircraft leasing company, to $55.00, a slight decrease from the previous $56.00. Despite this change, the firm maintains an Outperform rating on the stock.
The revision follows Air Lease's first-quarter 2024 earnings, which reported a minor shortfall in revenue. According to BMO Capital, the company's near-term estimates were reduced by 5% due to lower lease revenues, specifically from the end-of-lease contributions, which overshadowed the increased gains from both sale volume and margins.
The report also highlighted positive industry trends, noting that rates on leasing contracts recently agreed upon are approximately 14-15% higher compared to those signed two years ago. This increase suggests potential for continued lease rate growth, considering the typical two-year delay between contract signing and aircraft delivery.
BMO Capital's new target price for Air Lease is based on a valuation metric known as two-year-forward tangible common equity (TCE), which is the product of a 12% return on TCE (RoTCE) and an 8x target price-to-earnings (P/E) ratio.
Despite the minor adjustment in the price target, the firm's outlook on Air Lease remains positive, underpinned by supportive industry trends and prospects for lease rate expansion.
InvestingPro Insights
As BMO Capital Markets updates its price target for Air Lease Corporation, incorporating real-time data and expert insights can provide a more comprehensive view of the company's financial health and stock performance. According to InvestingPro data, Air Lease boasts a strong gross profit margin of nearly 60% for the last twelve months as of Q1 2024, indicating robust profitability in its operations. The company's P/E ratio stands at a modest 9.66, suggesting the stock may be undervalued when considering its near-term earnings growth. Additionally, the company's revenue growth for the same period is impressive at over 15%, highlighting its successful expansion efforts.
From the perspective of InvestingPro Tips, Air Lease's commitment to shareholder returns is evident, having raised its dividend for 12 consecutive years, a testament to its financial stability and management's confidence in the business. Moreover, two analysts have revised their earnings upwards for the upcoming period, signaling optimism about the company's future performance. For investors who appreciate both stability and growth potential, these factors could be particularly compelling.
For those looking to delve deeper into Air Lease's financials and stock analysis, InvestingPro offers additional insights. By using the coupon code PRONEWS24, investors can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a wealth of data and analytics to inform their investment decisions. With several more InvestingPro Tips available on the platform, investors can gain a richer understanding of the company's prospects.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.