AerCap, today's IBD 50 Stocks To Watch, is setting up in a new base. The company's operations continue to recover from the effects of the Covid-19 pandemic restrictions. AerCap also stands to benefit from the recent acquisition of GE's aircraft leasing unit.
Buying stocks in a market correction is less than a good idea, but stocks that close in on a buy point in soft markets are stocks to watch. They're often the leaders of the next rally.
Dublin, Ireland-based AerCap, bills itself as the largest owner of commercial aircraft, which it leases to airlines. With offices and operations around the globe, it owns more than 2,000 aircraft and has more than 300 customers, according to its website. It also provides parts and services.
Earnings Rebound For Stock To Watch
Travel restrictions related to the pandemic took a big bite out of AerCap's earnings in 2020 and early 2021. But the bottom line has ramped up the past two quarters. Beginning in the fourth quarter of 2020, earnings nose-dived 91% and 10% from year-earlier periods before rebounding to growth of 24% in Q2 2021 and 226% in Q3 to $4.04 a share.
Sales followed a similar trajectory, falling 18% and 12% before growing 3% and 42%, reaching $1.45 billion in Q3.
"This quarter was an important inflection point for the company," CEO Aegnus Kelly said. "Our business continues to recover from the effects of the Covid-19 pandemic, with leasing demand and cash collections remaining strong."
The company announced Nov. 1 that it completed its acquisition of the GE Capital Aviation Services (GECAS) business from General Electric.
"The GECAS transaction adds a portfolio of well-priced assets and a deeply experienced team of people that will further enhance AerCap's position as the lessor of choice for airlines around the world," Kelly noted in a news release on Q3 results.
Strong Earnings Outlook
AerCap's earnings prospects also justify it as one of the key growth stocks to watch now. Consensus forecasts of analysts tracked by FactSet put earnings for the fourth quarter at $1.74 a share, up 690% from 22 cents a year earlier. Sales are pegged to rise 29% to $1.33 billion.
For full year 2021, EPS is expected to reach $8.55, up 54%.
A look at IBD Stock Checkup shows AerCap with a Composite Rating of 92 and a Relative Price Strength Rating of 94.
What else puts AerCap among stocks to watch?
AER stock is working on a cup-with-handle base that started forming when the stock peaked at 71.38 on Nov. 10, according to MarketSmith stock chart analysis. From there the stock worked its way down 24% to 54.03 by Nov. 30 and then started forming the right side of the cup. A handle started forming on Jan. 4 at 69.36, under which the stock has drifted sideways. The buy point is 10 cents higher at 69.46, with the buy range going up to 72.93.
A positive technical sign comes from AerCap's relative strength line, which has been trending upward toward a new high.
AerCap ranks a solid No. 4 in IBD's commercial services leasing group, which includes leasing companies in several business areas. Another aircraft leaser in the group is Air Lease, which ranks No. 16 in Stock Checkup.
Even if AerCap's stock does break out during the stock market correction, investors should use caution. Studies have shown that three out of four stocks follow the general market lower in corrections. Institutional investors are less-active buyers in soft markets, which can remove upside potential for stocks.
