Aircastle Limited (AYR) vs. Air Lease Corporation (AL) Critical Analysis

Aircastle Limited (NYSE: AYR) and Air Lease Corporation (NYSE:AL) are both transportation companies, but which is the better stock? We will compare the two businesses based on the strength of their dividends, institutional ownership, risk, valuation, earnings, profitabiliy and analyst recommendations.

Profitability

This table compares Aircastle Limited and Air Lease Corporation’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Aircastle Limited	19.81%	8.88%	2.21%
Air Lease Corporation	25.56%	11.02%	2.65%

Volatility & Risk

Aircastle Limited has a beta of 1.8, meaning that its stock price is 80% more volatile than the S&P 500. Comparatively, Air Lease Corporation has a beta of 1.78, meaning that its stock price is 78% more volatile than the S&P 500.

Insider and Institutional Ownership

63.4% of Aircastle Limited shares are held by institutional investors. Comparatively, 92.1% of Air Lease Corporation shares are held by institutional investors. 2.7% of Aircastle Limited shares are held by insiders. Comparatively, 9.8% of Air Lease Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Aircastle Limited pays an annual dividend of $1.04 per share and has a dividend yield of 4.4%. Air Lease Corporation pays an annual dividend of $0.30 per share and has a dividend yield of 0.8%. Aircastle Limited pays out 52.0% of its earnings in the form of a dividend. Air Lease Corporation pays out 8.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Aircastle Limited has increased its dividend for 6 consecutive years and Air Lease Corporation has increased its dividend for 3 consecutive years. Aircastle Limited is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and target prices for Aircastle Limited and Air Lease Corporation, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Aircastle Limited	1	7	1	0	2.00
Air Lease Corporation	0	1	6	0	2.86

Aircastle Limited presently has a consensus target price of $24.22, suggesting a potential upside of 2.46%. Air Lease Corporation has a consensus target price of $45.00, suggesting a potential upside of 12.50%. Given Air Lease Corporation’s stronger consensus rating and higher possible upside, analysts clearly believe Air Lease Corporation is more favorable than Aircastle Limited.

Earnings and Valuation

This table compares Aircastle Limited and Air Lease Corporation’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Aircastle Limited	$788.43 million	2.36	$157.43 million	$2.00	11.82
Air Lease Corporation	$1.44 billion	2.87	$347.66 million	$3.37	11.87

Air Lease Corporation has higher revenue and earnings than Aircastle Limited. Aircastle Limited is trading at a lower price-to-earnings ratio than Air Lease Corporation, indicating that it is currently the more affordable of the two stocks.

Summary

Air Lease Corporation beats Aircastle Limited on 14 of the 17 factors compared between the two stocks.

About Aircastle Limited

Aircastle Limited is a holding company. The Company, through its subsidiaries, acquires, leases and sells commercial jet aircrafts to airlines. The Company is engaged in financing and managing commercial flight equipment. The Company manages its aircrafts in the United States, Ireland and Singapore. As of December 31, 2016, the Company owned and managed on behalf of its joint ventures 206 aircrafts leased to 71 lessees located in 36 countries. The Company originates acquisitions and sales through relationships with airlines, other aircraft lessors, financial institutions and brokers, as well as other sources. As of February 7, 2017, the Company had lease commitments or letters of intent to lease or sell 16 aircrafts. The Company’s aircraft portfolio includes passenger wide-body, passenger narrow-body and freighter aircrafts. The Company’s portfolio spans across various regions, such as the Middle East and Africa, South America, North America, Asia and Pacific, and Europe.

About Air Lease Corporation

Air Lease Corporation is an aircraft leasing company. The Company is principally engaged 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 across the world. Along with its leasing activities, the Company sells aircraft from its operating lease portfolio to third parties, including other leasing companies, financial services companies and airlines. The Company also provides fleet management services to investors and owners of aircraft portfolios for a management fee. The Company provides aircraft to airline customers in various markets, such as Asia, the Pacific Rim, Latin America, the Middle East, Europe, Africa and North America. As of December 31, 2016, the Company had 237 owned aircraft and 30 aircraft in its managed fleet portfolio.