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Aircastle: In the Skies

03/31/2017 2:50 am EST


Bryan Perry

Editor, Cash Machine, Premium Income, Quick Income Trader, Instant Income Trader

A lot of attention was given to the fourth quarter 13F filing by Warren Buffett's Berkshire Hathaway (BRK.A) that showed large purchases of airline stocks, observes Bryan Perry, editor Cash Machine.

By doing so, he basically anointed the sector a good one for investors. His purchases help to affirm investor confidence, while making a statement that the longer fundamental trends for the airline business are healthy.

This kind of tacit validation also undergirds the airline leasing business. Here, I want to bring a new name to our Safe Haven Portfolio that is squarely in the midst of a robust secular up cycle for the jet leasing business.

Aircastle Limited (AYR), through its subsidiaries, acquires, leases and sells commercial jet aircraft to airlines. The company also invests in other aviation assets.

As of December 31, 2016, its aircraft portfolio comprised 206 aircraft leased to 71 lessees located in 36 countries.

In aggregate, Aircastle currently has a Zacks Value Style Score of “A,” which puts it into the top 20% of all stocks for which Zacks provides a valuation.

The company posted fourth-quarter results of $0.90 per share versus forecasts of $0.51 per share, for a 76% upside surprise. Earnings revisions are trending higher as a result.

The current quarter, as well as the full-year estimate, has seen two upward revisions and has had a meaningful impact on the consensus estimate.

Indeed, the current quarter consensus estimate has risen by 20.8% in the past two months, while the full year estimate has increased by $2.39 per share.  The company raised its annual dividend from $0.98 to $1.04 to produce a current yield of 4.43%.

Shares of AYR gapped higher to $26 on the earnings report and since have retraced some of that gain to where the stock is trading at $23, which is what I view as a very attractive entry point. Buy AYR under $24.

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