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Here's Why Investors Should Give Air Lease (AL) a Miss

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Air Lease Corporation’s (AL - Free Report) financial stability is challenged by high operating expenses and low liquidity. High interest expenses, an increase in aircraft transition costs and a rise in aviation insurance expenses exacerbate the strain on the company's bottom line. Also, low liquidity impedes its ability to meet obligations, thereby making it an unattractive choice for investors’ portfolios.

Let’s delve deeper

Southward Earnings Estimate Revision: The Zacks Consensus Estimate for current-quarter earnings has been revised 1.2% downward over the past 60 days. For the current year, the consensus mark for earnings has moved 0.9% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.

Weak Zacks Rank: AL currently carries a Zacks Rank #4 (Sell).

Unimpressive Price Performance: Air Lease has declined 8.5% over the past year against its industry’s 40.5% growth.

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Other Headwinds: High operating expenses, driven by a rise in interest expenses, an increase in aircraft transition costs and a jump in aviation insurance expenses,impose a threat to AL's bottom line. In 2023, total operating expenses grew 18.6% year over year to $1.99 billion. In the first quarter of 2024, operating expenses rose 10.5% year over year to $528 million.

Air Lease ended the first quarter of 2024 with cash and cash equivalents of $554.37 million, lower than $19.5 billion of debt financing and net of discount and issuance costs. This implies that the company does not have enough cash to meet its debt burden, further raising liquidity concerns.

Stocks to Consider

Some better-ranked stocks from the Zacks Transportation sector are Wabtec Corporation (WAB - Free Report) and Kirby Corporation (KEX - Free Report) .

WAB currently sports a Zacks Rank #1 (Strong Buy) and has an expected earnings growth rate of 22.6% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.

WAB has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 11.5%. Shares of Wabtec have surged 63.9% in the past year.

KEX currently sports a Zacks Rank #1 and has an expected earnings growth rate of 42.2% for the current year.

The company has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of KEX have rallied 59.1% in the past year.

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