Industry Overview - The Zacks Transportation - Equipment and Leasing industry is facing a challenging macroeconomic environment characterized by persistent inflation, tariff-related tensions, and supply-chain disruptions, along with geopolitical issues [1] - The industry has underperformed compared to the Zacks S&P 500 Composite and the broader Zacks Transportation sector, gaining only 1.8% over the past three months, while the S&P 500 increased by 10.1% and the broader sector rose by 3.3% [2] Company Highlights - Companies like The Greenbrier Companies, Ryder Corporation, and Air Lease Corporation are noted for their solid investor-friendly initiatives, including consistent dividend payouts and share buybacks, indicating strong financial health [3][7] - Dividend growth stocks are typically mature companies that provide downside protection against market volatility, supported by strong fundamentals such as sustainable business models, profitability, rising cash flows, good liquidity, and strong balance sheets [4] Stock Selection Criteria - A dividend payout ratio of less than 60% is considered sustainable, indicating a healthy balance between earnings and dividends [8] - A dividend yield greater than 1% is preferred, with selected stocks showing dividend growth over the past five years and carrying a Zacks Rank of 3 (Hold) or better [9] Company Specifics Greenbrier Companies (GBX) - Headquartered in Lake Oswego, OR, Greenbrier has a market capitalization of $1.50 billion and pays a quarterly dividend of $0.32, yielding 2.72% [10] - The company's payout ratio is 18%, with a five-year dividend growth rate of 3.47% [10] - In 2022, Greenbrier paid $35.8 million in dividends and repurchased no shares; in 2023, it paid $36.1 million in dividends and repurchased $56.9 million; in 2024, dividends were $38.4 million with $1.3 million in share repurchases [12] Ryder Corporation (R) - Based in Coral Gables, FL, Ryder has a market capitalization of $7.64 billion and pays a quarterly dividend of $0.91, yielding 1.94% [13] - The payout ratio is 26%, with a five-year dividend growth rate of 9.47% [13] - Ryder returned $123 million in dividends and $557 million in share repurchases in 2022; in 2023, it paid $128 million in dividends and repurchased $337 million; in 2024, it returned $456 million to shareholders [14] Air Lease Corporation (AL) - Headquartered in Los Angeles, CA, Air Lease has a market capitalization of $6.76 billion and pays a quarterly dividend of $0.22, yielding 1.45% [15][16] - The payout ratio is 17%, with a five-year dividend growth rate of 8.34% [16]

Financial Data and Key Metrics Changes - Air Lease generated revenues of $732 million, a 9.7% increase over the prior period, driven by a 13.5% increase in rental revenue [21][7] - Diluted earnings per share were $3.33, benefiting from new aircraft deliveries and significant insurance proceeds [7][21] - The company recognized a net benefit from insurance settlements of $344 million during the second quarter, boosting book value per share to $65.53 [27][21] Business Line Data and Key Metrics Changes - The fleet's net book value and book value per common share reached all-time record levels [7] - The weighted average fleet age rose slightly to 4.8 years, while the weighted average lease term remained unchanged at 7.2 years [9] - Fleet utilization remained at 100% [9] Market Data and Key Metrics Changes - The aircraft sales pipeline increased to $1.4 billion, reflecting strong demand in the secondary market [10][24] - The company expects around $1.5 billion in total aircraft sales for 2025, with $300 million projected for the third quarter [11][10] - Lease rates remain strong, with extensions yielding higher rates than previous contracts [12][58] Company Strategy and Development Direction - The company canceled its order for seven A350 freighter aircraft, freeing up over $1 billion in future capital commitments [13] - Air Lease is focused on maintaining a strong balance sheet while considering opportunities to return capital to shareholders [14][29] - The order book is fully placed through 2026, with a disciplined approach to aircraft investment [12][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the airline industry's recovery, noting a 27% rise in adjusted operating profit for Lufthansa Group and a 44% increase for Air France KLM [15][16] - The company anticipates continued strong demand for commercial aircraft, with global passenger traffic expanding at around 5% year-to-date [16] - Management highlighted the positive impact of declining fuel prices and U.S. dollar weakness on airline profitability [15][14] Other Important Information - The company expects to recognize an additional $60 million net benefit from insurance settlements in the third quarter [8] - Interest expense rose by approximately $19 million year-over-year, driven by a 29 basis point increase in the composite cost of funds [25] - The company maintains a strong liquidity position with $7.9 billion in cash and $31 billion in unencumbered assets [29] Q&A Session Summary Question: Update on lease expirations and maturities - Management confirmed that guidance for a 150 to 200 basis point improvement in yield remains valid, tracking as expected [34] Question: Capital allocation strategy - Management indicated that buybacks are attractive, but maintaining a strong balance sheet is a priority [39] Question: Demand from airline customers - Management noted that there is no change in positive momentum for passenger aircraft demand, with some caution in the cargo markets due to tariffs [82][81] Question: Production stability from OEMs - Management confirmed that Boeing has met delivery projections, while Airbus has not experienced further slippage since earlier notifications [73] Question: Expectations for end of lease revenue - Management expects similar levels of end of lease revenue in 2026 as in 2025, depending on lease extensions [56] Question: Aircraft sales expectations - Management targets $1.5 billion in aircraft sales for 2025 and anticipates maintaining this level in subsequent years [51][50]