Free Stock Research Report: AerCap Holdings NV (AER)

During the fourth quarter of 2013, AerCap Holdings NV (NYSE:AER) was a popular stock among hedge funds, with many managers, such as Eric Chen of Antipodean Advisors, Ross Margolies of Stelliam Investment Management and Ken Heebner of Capital Growth Management, reporting new stakes in this aircraft lessor. Other new shareholders with stakes in excess of 1% of AER’s shares outstanding include Michael Price / Amos Meron of Empyrean Capital Partners, Robert Pitts of Steadfast Capital Management and Anand Parekh of Alyeska Investment Group.

AerCap Holdings N.V. (NYSE:AER)

Beating the market can be difficult when picking stocks on your own. One common source of alpha can be focusing on small cap stocks, which tend to outperform its larger peers over time. Another source of alpha can be following the smart money, by mimicking the trades of professional investors. Our research has shown that, by combining these two approaches – buying the most popular small-cap stocks recently purchased by hedge funds – one can outperform the market on average (read the details here).

AerCap Holdings NV (NYSE:AER) is a $4.9 billion market capitalization integrated aviation company that engages in the leasing, financing, trading, sales and management of commercial aircraft and engines. On December 16, 2013, it announced the acquisition of ILFC (International Lease Finance Corporation) from American International Group Inc (NYSE:AIG) in a cash and stock deal valued at approximately $5.4 billion, with closing expected during 2Q14. The combined company will be the largest global franchise in the aircraft leasing industry, with a fleet of 1,329 aircraft and an order book for an additional 385. Financially, the merged company will have annual revenue of $5 billion, net profit of $1B, operating cash flow of $3B, run-rate EPS of $4.00 and return on equity of roughly 15%. The transaction will produce meaningful cost savings and operating efficiencies as well as a lower tax expense, as ILFC will relocate to AER’s headquarters in Ireland (which has a lower tax rate than the U.S.). Although AER is taking on additional debt to finance the deal, future profits and synergies are expected to reduce its leverage meaningfully over the following four to five years.

Following the deal announcement, AerCap Holdings NV (NYSE:AER)’s stock price has doubled but its valuation still looks reasonable, trading at a forward P/E of 13.5X (versus peers trading between 14.4-16.8X), possibly reflecting a combination of uncertainty related to ILFC integration risk as well as difficulty in forecasting earnings for such a complex transaction (EPS estimates for 2014 range from a low of $2.70 to a high of $3.74, while the for 2015 is even wider, with a low of $3.00 to a high of $5.25). However, as the acquisition closes and investors gain more clarity on the earnings benefit from it, both the multiple and estimates should improve.

Given the large size of the deal, which quadruples AerCap Holdings NV (NYSE:AER)’s existing fleet size, execution will be key to driving further upside in the stock. The order book will also play an important role, as the combined company will be taking delivery of highly fuel-efficient models through 2018 and beyond on very favorable terms, just when demand for such aircraft is high. Combined with increased passenger traffic globally and a healthier base of airline customers (following recent consolidation activity), AerCap Holdings NV (NYSE:AER) is well-positioned to benefit.

Disclosure: none

Recommended Reading:

Stocks That Both David Einhorn and Insiders Love

Steven Cohen Boosts SAC’s Stake in ITT Educational Services, Inc. (ESI)

Mario Gabelli Initiates 8% Stake in Zale Corporation (ZLC)

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!