Air Lease Gains 16% in a Month: What Should Investors Do Now?

Core Viewpoint - Air Lease Corporation (AL) has experienced a significant increase in its stock price, outperforming its industry and competitors over the past 30 days [1]. Group 1: Stock Performance - AL's stock has improved in double digits recently, leading to a favorable comparison with industry peers such as Wabtec Corporation and The Greenbrier Companies [1]. - The recent rally raises questions about the sustainability of AL's stock performance and whether investors should consider taking profits [4]. Group 2: Revenue Growth - AL's revenue growth is driven by an expanding fleet, with the net book value of flight equipment rising to $27.9 billion at the end of Q3 2024, up from $25.6 billion a year earlier [5]. - As of September 30, 2024, AL's fleet comprised 485 owned aircraft and 64 managed aircraft, with commitments to purchase 287 additional aircraft from Boeing and Airbus through 2029 [6]. - In the first nine months of 2024, AL reported $104.2 million in profits from the sale of 25 aircraft and $14.5 million from three sales-type leases, contributing to revenue from aircraft sales and trading activities [7]. Group 3: Challenges Facing the Company - AL is facing headwinds such as increased interest expenses due to a higher composite cost of funds and a growing debt balance, which are negatively impacting profitability [8]. - Operating expenses rose by 18.6% to $1.99 billion in 2023, and increased by 9.8% year-over-year to $1.63 billion in the first nine months of 2024, primarily due to higher selling, general, and administrative expenses [9]. - The company's liquidity position is concerning, with cash and cash equivalents of $460.78 million at the end of Q3 2024, significantly lower than its $20.16 billion debt financing [10]. - Long-term debt increased to $20.1 billion at the end of Q3 2024, up from $18.6 billion a year ago, raising concerns about the company's high debt levels [10]. Group 4: Investment Outlook - Despite the growth in fleet and sales activity, the challenges faced by AL have led to downward revisions in earnings estimates [13]. - The current recommendation is to hold the stock, with a Zacks Rank of 3, suggesting that investors should monitor developments closely for a more favorable entry point [14][15].