Air Lease Corporation Class A (AL) Extended Graph Analysis

February 13th, 2019 Posted by Extended Analysis 4 comments

Air Lease Corporation Class A (AL)

air-lease-corporation-al

About the Company

Company Profile

Air Lease Corporation Class A (AL) is a leading aircraft leasing company that was founded by aircraft leasing industry pioneer, Steven F. Udvar-Házy. The Company engages in purchasing new commercial jet transport aircraft directly from aircraft manufacturers. Such as The Boeing Company (“Boeing”) and Airbus S.A.S. (“Airbus”), and leasing those aircraft to airlines throughout the world. The company is based in the United States. Further, AL is headquartered in Los Angeles, California, USA. Moreover, the initial public offering (IPO) of Class A stock on the New York Stock Exchange on April 19, 2011, and in fact raised an estimated total of US $965.6 million.

AIR LEASE EXTENDED GRAPH ANALYSIS

A) AIR LEASE CASH FLOW

CASH FLOWS

Net Cash Flow provided by Operating Activities Net Cash used for Investing activities Net Cash (used for) financing activities Capital expenditure Free Cash Flow
2013 654,213,000 -2,185,894,000 1,571,765,000 -2,283,642,000 -1,629,429,000
2014 769,018,000 -1,805,657,000 1,049,285,000 -2,409,506,000 -1,640,488,000
2015 839,795,000 -2,152,801,000 1,186,862,000 -2,905,548,000 -2,065,753,000
2016 1,020,078,000 -2,005,516,000 1,103,565,000 -2,993,556,000 -1,973,478,000
2017 1,059,713,000 -2,143,951,000 1,101,640,000 -2,923,440,000 -1,863,727,000
TTM 1,178,181,000 -3,123,079,000 1,948,309,000 -3,545,839,000 -2,367,658,000

Facts:

  • Operating cash flow was $1.06 billion and $1.2 billion in 2017 and the trailing twelve months respectively.
  • Net cash used for investing activities was -$2.1 and $3.1 billion in 2017 and the trailing twelve months respectively.
  • On the other hand, net cash used for financing activities was $1.1 and $1.9 billion in 2017 and the trailing twelve months respectively.
  • Next, capital expenditure was -$2.9 and -$3.5 billion in 2017 and the trailing twelve months respectively.
  • Also, Free cash flow was -$1.9 and -$2.4 billion in 2017 and the trailing twelve months respectively.

Explanation

  • Operating cash flow shows that AL is successful in its operation by producing sufficient money for its growth.
  • On the other hand, net cash used for investing activities is consist of flight equipment under operating lease and payments for deposits on flight equipment purchases.
  • Moreover, the net cash used for financing activities is cash dividends paid and the acquisition of furnishings, equipment, and other assets.
  • Likewise, capital expenditures are:
    • $1.97 million – acquisition of flight equipment under operating lease.
    • $774k – payments on deposits on flight equipment purchases.
    • $177k – acquisition of aircraft furnishings, equipment, and other assets.
  • Moreover,  Free cash flow was negative in the last five years indicating that capital expenditures are higher than the operating cash flows. It might simply mean that AL is investing heavily in new equipment and other capital assets that cause excess cash to utilized.

Interpretation

As a result, Air Lease Corporation is liquid and has sa table cash flow in the past five years of its business operations.

 

B) AIR LEASE BALANCE SHEET

air-lease-corporation-al

Total Cash Current Asset Total Asset Current Liabilities Total Liabilities Equity Retained Earnings Total Debts Working Capital
2013 270,173,000 1,345,196,000 9,332,604,000 131,223,000 6,809,170,000 2,523,434,000 312,859,000 5,853,317,000 1,213,973,000
2014 282,819,000 1,427,422,000 10,774,784,000 190,952,000 8,002,722,000 2,772,062,000 555,573,000 6,714,362,000 1,236,470,000
2015 156,675,000 1,227,710,000 12,355,098,000 215,983,000 9,335,186,000 3,019,912,000 791,526,000 7,712,421,000 1,011,727,000
2016 274,802,000 1,565,478,000 13,975,616,000 256,775,000 10,593,429,000 3,382,187,000 1,143,311,000 8,713,874,000 1,308,703,000
2017 292,204,000 1,854,980,000 15,614,164,000 309,182,000 11,486,722,000 4,127,442,000 1,866,342,000 9,698,785,000 1,545,798,000

Facts:

  • Total cash were $275 and $292 million in 2016 and 2017 respectively.
  • And the current assets were $1.57 and $1.85 billion in 2016 and 2017 respectively.
  • Total assets were $13.98 and $18.6 billion in 2016 and 2017 respectively.
  • On the other hand, current liabilities were $256.8 and $309 million in 2016 and 2017 respectively.
  • Moreover, total liabilities were $1.59 and $11.49 billion in 2016 and 2017 respectively.
  • Consequently, the equities were $3.38 and $4.13 billion in 2016 and 2017 respectively.
  • In the same way, retained earnings were $1.14 and $1.87 billion in 2016 and 2017 respectively.
  • In addition, total debts were $8.71 and $8.7 billion in 2016 and 2017 respectively.
  • Similarly, working capitals were $1.31 and $1.55 billion in 2016 and 2017 respectively.

Explanation

  • Total cash has a growth of 8 percent in five years. Cash is 2 percent of total assets.
  • And also, current assets have a growth of 38 percent in five years. It is 12 percent of total assets.
  • Total assets have a growth of 67 percent in five years.
  • On the other hand, current liabilities increased 136 percent from 2013 to 2017. It is 3 percent of total liabilities.
  • Moreover, total liabilities increased by 69 percent from 2013 to 2017.
  • Likewise, equity had a growth of 64 percent in five years.
  • And also the retained earnings had a growth of 497 percent in five years and have a year-over-year growth averaging 60 percent.
  • Consequently, the total debt increased by 66 percent from 2013 to 2017.
  • Last, working capital was stable in the last five years at an average of $1.3 million indicating that AL was able to finance its short-term obligations. Further, it has a growth of 27 percent in five years.

Interpretation

AL is high leverage at nearly 400 percent. Its long-term debt represents 84 percent against total debt. Further, the debt was greater 43 percent against equity. However, its total assets were impressive and increase year-over-year in five years. Finally, the company’s balance sheet was stable and sound.

 

C) AIR LEASE FINANCIAL RATIOS

air-lease-corporation-class-a-al

2011 2012 2013 2014 2015 2016 2017 TTM
Asset Turnover (Average) 0.06 0.10 0.10 0.10 0.11 0.11 0.10 0.10
Return on Assets % 1.03 2.11 2.28 2.55 2.19 2.85 5.11 5.20
Financial Leverage (Average) 2.37 3.15 3.70 3.89 4.09 4.13 3.78 3.92
Return on Equity % 2.45 5.85 7.84 9.67 8.75 11.71 20.14 20.74
Return on Invested Capital % 1.84 3.65 3.97 4.27 4.01 4.73 7.35 7.28
Interest Coverage 2.44 2.56 2.73 3.05 2.67 3.27 3.36 3.19

Facts

  • The asset turnover ratio is averaging 0.10 in 2017 and the trailing twelve months.
  • Return on assets was 5.11 and 5.20 percent in 2017 and the trailing twelve months.
  • Moreover, Financial leverage is averaging 3.78 and 3.92 in 2017 and the trailing twelve months.
  • In addition, Return on equity was 20.14 and 20.74 in 2017 and the trailing twelve months.
  • Likewise, Return on invested capital was 7.35 and 7.28 percent in 2017 and the trailing twelve months.
  • And the interest coverage was 3.36 and 3.19 in 2017 and the trailing twelve months.

Explanation

  • Asset turnover ratio means that each dollar of assets generates an average of 10 cents of sales.
  • The return on assets (ROA) indicates that for every dollar that was invested in assets produced $51.10 and $52 of net income in 2017 and the trailing twelve months respectively.
  • On the other hand, financial leverage indicates that AL’s liabilities are 378 and 392 percent of shareholders’ equity in 2017 and the trailing twelve months respectively, which are high.
  • Return on equity indicates that every dollar of common shareholders’ equity earned $20.14 and $20.74 in 2017 and the trailing twelve months respectively. In other terms, shareholders earned 2014 percent return on their investment.
  • Return on invested capital indicates that for every dollar invested in capital produces a $0.0735 and $0.0728 cents returns in 2017 and the trailing twelve months respectively.
  • Lastly, interest coverage means that AL 3.36 and 3.19 times more earnings than its current interest payments in 2017 and the trailing twelve months respectively.

Interpretation

Overall, efficiency and profitability ratios show positive results although financial leverage has a high ratio. Further, it indicates that debt is used effectively to convert capital to earned profits. Furthermore, the company is capable to pay its interest on debt with its principal.

 

D) AIR LEASE INCOME AND MARKET

air-lease-corporation-al

Sales EBIT Net Income Market Cap Intrinsic Value
2013 858,675,000 485,812,000 190,411,000 3,222,000,000 712,340,1357
2014 1,050,493,000 615,366,000 255,998,000 3,576,000,000 2,097,085,219
2015 1,222,840,000 731,097,000 253,391,000 3,434,000,000 2,900,818,643
2016 1,419,055,000 866,439,000 374,925,000 3,531,000,000 3,601,547,148
2017 1,516,380,000 896,901,000 756,152,000 4,983,000,000 14,180,694,017
TTM 1,628,192,000 953,981,000 843,538,000 3,351,000,000 12,118,551,202

Facts:

  • Sales were $1.5 billion and $1.6 billion in 2017 and 2018 TTM respectively.
  • And the EBIT was $896.9 million and $954 million in 2017 and 2018 TTM respectively.
  • Net Income was $756 million and $843.5 million in 2017 and 2018 TTM respectively.
  • Further, the market capitalization was $4.98 billion and $3.351 billion in 2017 and 2018 TTM respectively.
  • Likewise, intrinsic value was $14.181 and $12,119 billion in 2017 and 2018 TTM respectively.

Explanation:

  • The sales growth was 90 percent in five years and increases year-over-year at an average of 14 percent.
  • And the EBIT growth was 96 percent in five years and increases year-over-year at an average of 15 percent.
  • Moreover, the net income has a growth of 343 percent in five years and increases year-over-year at an average of 39 percent, except in 2015 to 2016 where the growth was -1.02 percent.
  • On the other hand, market capitalization has a growth of 4 percent in five years and the year-over-year growth was averaging 3.64 percent. It suffered negative growth in 2016 at 4 percent and the trailing twelve months at 32.75 percent.
  • Further, the intrinsic value was 185 and 185 percent above the market cap in 2017 and 2018 TTM respectively.

Interpretation

AL management has managed to utilize its assets to produce sufficient revenue for the operation of the business in the last five years. As a result, the company is profitable. Moreover, its intrinsic value was higher than the market cap indicating that the stock price of AL was trading at an undervalued price.

 

E) AIR LEASE KEY EXECUTIVE COMPENSATION

air-lease-corporation-al

SUMMARY

Executive 2013 2014 2015 2016 2017 (2017) %
Key Executive Compensation 24,969,215 26,494,168 24,748,889 27,000,783 24,568,646 100.00%
Steven F. Udvar-Hazy – Exec Chairman of the Board 9,122,086 9,674,429 9,079,933 9,686,620 7,924,666 32.26%
John L. Plueger – CEO and President 7,122,845 7,482,030 7,012,942 7,785,065 8,076,572 32.87%
Gregory B. Willis – CFO and EVP 1,277,367 1,554,217 1,923,635 2,272,815 2,202,488 8.96%
Jie Chen – EVP and Managing Director of Asia 4,163,116 4,369,772 3,671,083 3,881,834 3,323,377 13.53%
Grant A. Levy – EVP 3,283,801 3,413,720 3,061,296 3,374,449 3,041,543 12.38%

DETAILED DISTRIBUTION

Key Executive Compensation

2013 2014 2015 2016 2017 % 2017
Salary 5,351,865 5,443,304 5,508,251 5,335,625 5,153,417 20.98%
Bonus 1,492,816 1,017,497 1,337,132 1,730,618 0
Restricted Stock Award 7,866,680 9,097,027 10,348,203 9,565,268 11,819,083 48.11%
Non-Equity Compensation 9,936,909 10,569,427 7,220,411 9,882,069 7,029,850 28.61%
Other Compensation 320,945 366,913 334,892 487,203 566,296 2.30%
Total 24,969,215 26,494,168 24,748,889 27,000,783 24,568,646 100.00%

Steven F. Udvar-Hazy – Exec Chairman of the Board

Salary 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 22.71%
Bonus 526,291 347,328 456,840 649,801 0
Restricted Stock Award 3,376,861 3,897,384 4,316,339 3,817,607 3,267,474 41.23%
Non-Equity Compensation 3,276,000 3,420,000 2,340,000 3,132,000 2,548,000 32.15%
Other Compensation 142,934 209,717 166,754 287,212 308,392 3.89%
Total 9,122,086 9,674,429 9,079,933 9,686,620 7,924,666 100.00%

John L. Plueger – CEO and President

Salary 1,500,000 1,500,000 1,500,000 1,250,000 1,000,000 12.38%
Bonus 410,561 258,552 380,700 541,500 0
Restricted Stock Award 2,412,042 2,793,105 3,093,352 3,279,398 5,145,622 63.71%
Non-Equity Compensation 2,730,000 2,850,000 1,950,000 2,610,000 1,770,000 21.92%
Other Compensation 70,242 80,373 88,890 104,167 160,950 1.99%
Total 7,122,845 7,482,030 7,012,942 7,785,065 8,076,572 100.00%

Gregory B. Willis – CFO and EVP

Salary 401,969 443,333 491,667 555,917 606,417 27.53%
Bonus 25,886 43,969 67,085 83,875 0
Restricted Stock Award 306,571 409,224 763,157 485,301 818,496 37.16%
Non-Equity Compensation 492,492 641,250 585,000 1,126,389 755,790 100.00%
Other Compensation 50,449 16,441 16,726 21,333 21,785 0.99%
Total 1,277,367 1,554,217 1,923,635 2,272,815 2,202,488 100.00%

Jie Chen – EVP and Managing Director of Asia

Salary 876,563 905,596 914,167 920,833 928,667 27.94%
Bonus 303,148 228,500 246,881 259,003 0 0.00%
Restricted Stock Award 930,018 1,063,983 1,229,799 1,060,523 1,369,522 41.21%
Non-Equity Compensation 2,027,917 2,141,502 1,248,975 1,604,280 987,660 29.72%
Other Compensation 25,470 30,191 31,261 37,195 37,528 1.13%
Total 4,163,116 4,369,772 3,671,083 3,881,834 3,323,377 100.00%

Grant A. Levy – EVP

Salary 773,333 794,375 802,417 808,875 818,333 26.91%
Bonus 226,930 139,148 185,626 196,439 0
Restricted Stock Award 841,188 933,331 945,556 922,439 1,217,969 40.04%
Non-Equity Compensation 1,410,500 1,516,675 1,096,436 1,409,400 967,600 31.81%
Other Compensation 31,850 30,191 31,261 37,296 37,641 1.24%
Total 3,283,801 3,413,720 3,061,296 3,374,449 3,041,543 100.00%

Facts:

In 2017:

  • Total key executive compensation was $24.57 million.
  • And Steven F. Udvar-Hazy total compensation was $7.92 million.
  • John L Plueger total compensation was $8.08 million.
  • Gregory B. Willis total compensation was $2.20 million.
  • Jie Chen total compensation was $3.23 million.
  • Grant A. Levy total compensation was $3.04 million.

Explanation

  • The total key executive compensation represents 3.25 percent of the total net income in 2017.
  • And Steven F. Udvar-Hazy total compensation represents 32.26 percent of the total key executive compensation, in which 22.71 percent is salary or equivalent to $1.8 million.
  • Further, John L. Plueger total compensation represents 32.86 percent of the total key executive compensation in which 12.38 percent is salary equivalent to $1.0 million.
  • Likewise, Gregory B. Willis total compensation represents 8.96 percent of the total key executive compensation in which 27.53 percent is salary or equivalent to $606k.
  • Next is Jie Chen total compensation represents 13.53 percent of the total key executive compensation in which 27.94 percent is salary or equivalent to $929k.
  • Similarly, Grant A. Levy total compensation represents 12.38 percent of the total key executive compensation in which 26.91 percent is salary or equivalent to $818k.

Interpretation

The total key executive compensation is averaging $25.6 million in five years comparing to the average 5-year net income of $366 million. Therefore, it indicates that the total executive compensation is 7 percent of the average net income.

 

F) LOBBYING/CONTRIBUTIONS TO POLITICIANS

There is no record of lobbying found for Air Lease Corporation (AL).

Search Results

No lobbying income or spending found.

This may be because no lobbying was reported, because the lobbying contract was terminated, or because reported lobbying was less than the $10,000 threshold that allows us to build a profile. The Center for Responsive Politics conservatively assumes any lobbying under the $10,000 threshold to be $0 earned or spent. Please click on “View Report Images” on the tab navigation bar to see if this firm or client has filed any reports.

NOTE: All lobbying expenditures on this page come from the Senate Office of Public Records. Data for the most recent year was downloaded on October 24, 2018.

 

G) AIR LEASE FINANCIAL STRENGTH

air-lease-corporation-al

Data:

Working Capital Total Assets Sales EBIT Market Value of Equity Book Value of Total Liabilities Retained Earnings
1,545,798,000 15,614,164,000 1,629,374,000 953,981,000 4,127,442,000 11,486,722,000 1,866,342,000

Formula:

Z-Score =  1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Calculation Ratio Z-Score Result
A – Working Capital/Total Assets 0.10 1.2 0.12
B – Retained Earnings/Total Assets 0.12 1.4 0.17
C – EBIT/Total Assets 0.06 3.3 0.20
D – Market Value of Equity/Book Value of Total Liabilities 0.36 0.6 0.22
E-Sales/Total Assets 0.10 1.0 0.10
Z-Score 0.81

The above Z-Score is computed as follows:  Z-Score =  1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Facts:

  • A –  0.10 * 1.2 = 0.12
  • B – 0.12 * 1.4 = 0.17
  • C – 0.06 * 3.3 = 0.20
  • D – 0.36 * 0.6 = 0.22
  • E – 0.10 * 1.0 = 0.10
  • Z-Score = 0.81  

Explanation

Z-Score is a mathematical measurement that is used to compare data points from different sets of data to arrive at the relationship to the mean. Moreover, this impression is often known as the Altman Z-Score. This measurement was used to forecast the likelihood of the company would go bankrupt.

Interpretation

The Z-Score of AL is below 1.0 which is 0.81. Typically a score of 0 – 1.8 is more likely the company will declare bankruptcy. Alarming isn’t it. But wait let us go deeper and interpret it with care.

Let us note that, this statistical measurement sums several weighted financial ratios and compare it to the scale shown above  A, B, C, D & E. The profitability, liquidity, leverage, and efficiency is the main factors of this measurement. Hence, total assets are the denominator in four equations, therefore, total assets represent a huge percentage on all the ratios, the result is obviously low.  

In addition, analyzing this kind of industry, AL is an intensive industry which requires a huge amount of capital investment to run its business effectively. Further, AL invested heavily in property, plant, and equipment and in the last five years the company has never suffered a loss in its operation and is considered to be profitable.

In conclusion

Air Lease Corporation (AL)  has sound financial health and is profitable in the past five years. Debt is greater than equity and the leverage ratio is high at nearly 400 percent. And also, the company is investing heavily in equipment. Significantly, the management or the leaders of AL has a satisfactory strategic method in running the operation of the business for its growth and development. AL doesn’t have any expenses in lobbying. Moreover, AL has not failed in the past five years based on all the test and valuation made for AL above. As a result, I believe that Air Lease Corporation (AL) can be a good candidate for investment, therefore, I recommend a BUY on the stock of AL.

 

CITATION

https://www.sec.gov/cgi-bin/browse-edgar?CIK=AL&owner=exclude&action=getcompany

https://www.morningstar.com/

https://finance.yahoo.com/

https://airleasecorp.com/

https://en.wikipedia.org/wiki/Air_Lease_Corporation

https://www.opensecrets.org/lobby/lookup.php

https://www.opensecrets.org/industries/alphalist.php

Researched and written by Criselda

Twitter: criseldarome

Tags: , , , ,

4 comments

Junior Walker says:

This is a great buy. Well done on the analysis.

criseldar says:

Thank you so much.

Really enjoyed this article, how can I make is so that I receive an update sent in an email whenever you write a fresh article?

criseldar says:

Thank you for appreciating the article. You can find new and fresh articles if you regularly visit our website.

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