AerCap Holdings N.V. (NYSE: AER) has disappointed investors with its weaker-than-expected earnings for the fourth quarter of 2021. Earnings per share in the quarter lagged the consensus estimate by 45%. However, the quarterly revenues surpassed the consensus estimate by 12.2%.
Shares of AerCap slipped 8.4% to close at $51.44 on Wednesday. The stock lost an additional 0.4% in the extended trading session.
AerCap is an aviation leasing company. Along with leasing services of helicopters, aircraft, and engines, it provides aircraft management, sales, and financing services to a huge client base in the U.S., Hong Kong, Ireland, and multiple other countries. The $12.6-billion company is based in Dublin, Ireland.
AerCap’s adjusted earnings in the quarter were $1.04, way below the consensus estimate of $1.89.
Revenues stood at $1.38 billion and surpassed the consensus estimate of $1.23 billion. On a year-over-year basis, the top line (sourced from leasing services) grew 38.6% driven by the synergies from the GECAS buyout. AerCap acquired GECAS from General Electric Company (NYSE: GE) on November 1, 2021.
In the quarter, 158 lease agreements were executed by the company.
The company’s total revenues and other income in the quarter were $1.44 billion. Its total expenses increased 39.5% year-over-year to $1.35 billion. Diluted shares outstanding soared 58.1% year-over-year to 203.6 million in the quarter.
In 2021, AerCap’s adjusted earnings were $8.68 per share. Revenues in the year totaled $4,412 million, up 2.1% year-over-year. At the end of 2021, the company had a fleet of 3,701 helicopters, aircraft, and engines.
Exiting 2021, AerCap had cash and cash equivalents of $1,728.8 million, up 38.4% from the previous year. The company’s debts increased 74.7% year-over-year to $50,204.7 million.
In the year, the company generated a net cash flow of $3.7 billion, up 73.4% year-over-year, and its spending on the purchase of flight equipment at $1.7 billion reflected an increase of 118.8%.
AerCap’s CEO Aengus Kelly is hopeful to benefit from a healthy recovery in air travel across the globe in 2022.
About the GECAS buyout, Kelly said, “This transaction significantly enhanced and diversified our fleet, broadened our customer base and geographic reach, increased our product offering and added outstanding new talent – the combination of which we expect to lead to increased revenues, earnings and cash flows in the future.”
Impact of Russia-Ukraine Conflict
AerCap predicts that the ongoing war between Russia and Ukraine as well as the sanctions imposed on Russia by multiple nations will have an adverse impact on its financial performance.
Before the conflict started, AerCap had 135 aircraft and 14 engines leased to airlines in Russia. Also, 14 engines were leased in Russia through Shannon Engine Support joint venture. In Ukraine, the company had leased as many as seven aircraft.
Of all, the company has taken hold of 22 aircraft and 14 engines that were leased to Russian airlines. For the rest, impairment charges are expected to be raised by AerCap in the first quarter of 2022.
In 2021, AerCap used approximately $22.5 billion for the acquisition of GECAS.
Its debt repayments in the year amounted to $6 billion while dividends of just $323 thousand were paid to non-controlling interest holders and others. The company also used $76 million for repurchasing shares and others.
Last month, an analyst at Deutsche Bank, Hillary Cacanando, reiterated a Buy Rating on AerCap.
Overall, AerCap has a Strong Buy consensus rating based on three Buys. AerCap’s average price target is at $76, suggesting 47.74% upside potential from current levels. Over the past year, shares of AerCap have declined 12.4%.
Per TipRanks data, the bloggers are 100% Bullish on AER, compared to the sector average of 70%.
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