Air Lease Rides on Rental Equipment Amid Coronavirus Woes

We recently issued an updated report on Air Lease Corporation AL.

Given the severe impact of the coronavirus outbreak on the airline industry, in terms of declining air traffic, Air Lease is experiencing weakness in lease demand. Airline companies deferring aircraft deliveries to cope with the crisis are also a headwind for the company. Air Lease’s collection rate (total cash collected from lease rentals and maintenance reserves) declined substantially. While collection rate was 91% in the second quarter, it declined to 89% in July. Going forward, collection rate is expected to be under pressure due to declining travel demand.

Thanks to COVID-19 led disruptions, Air Lease reduced its capital expenditures in aircraft investments and is expecting to minimize aircraft sales for the rest of 2020. The lower capital expenditures will in turn affect revenues.

Air Lease Corporation Price

Air Lease Corporation Price

Air Lease Corporation price | Air Lease Corporation Quote

However, revenues from rentals of flight equipment are impressive. The metric rose 8.1% in first-half 2020 and led to a 10.2% increase in the top line. Considering the coronavirus-related setback, the segment’s performance in the first half is quite encouraging.

Zacks Rank & Stocks to Consider

Air Lease currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. KNX , United Parcel Service, Inc. UPS and Werner Enterprises, Inc. WERN. All the stocks sport a Zacks Rank # 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Knight-Swift, United Parcel and Werner is pegged at 15%, 7.7% and 8.5%, respectively.

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