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Value

Aircastle Limited (AYR - Snapshot Report) has delivered positive earnings surprises in four out of the last five quarters, supported by its significant geographic diversification that makes it less susceptible to economic downturns in any particular region. This provider of aircraft rental and leasing services outpaced the Zacks Consensus Estimate by a remarkable 43.3% in the first-quarter 2012. With a forward P/E multiple of just 8.6, this Zacks #1 Rank (Strong Buy) is an attractive pick for value investors.

A Robust Beginning of 2012

On May 3, Aircastle reported first quarter adjusted net earnings per share of 43 cents, beating the Zacks Consensus Estimate by 13 cents and the year-ago earnings by a penny. Total operating revenue of $164.9 million surpassed the Zacks Consensus Estimate by 5.3% and increased 4.4% year over year.

Segment wise, lease rental revenue (historically constituting 95% -99% of total revenue) was up 5.4%, reflecting synergies from new aircraft acquisitions. Other revenue was down 46.9%. First quarter EBITDA was down 2% year over year to $150.6 million, reflecting lower gain from the sale of older aircrafts along with lower maintenance revenue.

Upward Estimate Revisions

The Zacks Consensus Estimate for 2012 moved up 12.4% to $1.45 over the last 90 days, while it increased 4.6% to $1.58 for 2013. The current Zacks Consensus Estimate for 2012 indicates year-over-year improvement of 9.5%, while the 2013 estimate implies a 9.4% jump.

Impressive Valuation

Aircastle’s shares took a dive beginning in February 2012. However, the trend reversed in June with shares returning to a growth trajectory. Going forward, there is an untapped potential locked in the stock, evidenced by its current forward P/E multiple of 8.6 and P/B multiple of 0.6 (a P/E ratio below 15.0 and a P/B ratio under 3.0 generally indicate value).

Also, the company has other solid fundamentals, including a PEG ratio of 0.89, an 11% discount to the benchmark of 1.0 for a fairly valued stock. This implies strong future growth potential. Furthermore, Aircastle currently enjoys a dividend yield of 4.7% compared with the industry average of a meager 0.6%. The first-quarter of 2012 marked the company’s 24th straight dividend paying quarter.

Therefore, in addition to a value stock in nature, Aircastle offers a lucrative growth and income opportunity.

Headquartered in Stamford, Connecticut, Aircastle Limited was founded in 2004 and was formerly known as Aircastle Investment Limited. The company makes acquisitions, leasing and selling of high-utility commercial jet aircraft to passenger and cargo airlines globally. It has offices in the U.S., Ireland, and Singapore. On March 31, 2012, Aircastle had 120 passenger aircrafts and 25 freighter aircrafts, which were leased to 65 lessees located in 34 countries.

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