AerCap Holdings N.V. (NYSE: AER): Why Greenlight Loves This Aircraft Leasing Firm

David Einhorn‘s Greenlight Capital is bullish AerCap Holdings N.V. (NYSE: AER), a $6.38-billion market cap independent aircraft leasing company. In its Q4 investor letter, the fund discussed AerCap – which has been performing well on the share market this year so far. Let’s take a look at Greenlight’s comments on AerCap:

AER leases new and mid-life airplanes to airlines globally. AER’s 99%+ utilization rate and seven-
year average remaining lease term support a high degree of earnings visibility. The company is well-managed and a strong capital allocator. Since we invested in the company in 2014, AER has disposed of about 400 planes to improve its fleet age, technology mix and customer concentration, while generating strong gains on sale consistent with conservative carrying values.

During this period, the company has de-levered, bought back 35% of its shares outstanding and grown book value per share by 15% annually. Global traffic growth has averaged 6.5% annually over the last five years. The recent collapse in oil prices is a positive as it improves airline profitability, further stimulates global passenger traffic, and supports the values of used planes.

Nonetheless, shares of AER fell about 25% in December. At current values, we would expect management to accelerate the sale of aircraft to redeploy into an even more aggressive share repurchase program.

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AerCap Holdings N.V. (NYSE: AER) is engaged in aircraft leasing and aviation finance business. It is the largest owner of commercial aircraft in the world and the most active aircraft trader. Greenlight upped its stake in AerCap by 1.49% during the fourth quarter, according to the fund’s latest regulatory filing. At the end of the fourth quarter, the fund held 3.85 million shares of the company.

Shares of AerCap Holdings N.V. (NYSE: AER) are in the green this year so far. Since the start of the year, the stock has jumped 8.41%. However, over the past 12 months, the share price has dropped nearly 13%. The stock – which is trading at around $44.75 – has a consensus average recommendation of ‘OVERWEIGHT’ and a consensus average target price of $62.64 from analysts polled by FactSet.

Meanwhile, AerCap Holdings N.V. (NYSE: AER) isn’t popular among hedge funds tracked by Insider Monkey. At the end of the third quarter of 2018, only 22 funds held the stock, according to our database.