FBR Capital Upgrades AerCap Holdings (AER) to Outperform; Headwinds Receding Next Year
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FBR Capital upgraded AerCap Holdings (NYSE: AER) from Market Perform to Outperform with a price target of $53.00 (from $43.00), saying they see headwinds receding in 2017.
Analyst Christopher Nolan commented, "Ahead of AER’s investor day on November 16, we are upgrading our investment rating for AER to Outperform from Market Perform and increasing our price target to $53 from $43. We think AER’s 2016 earnings headwind from the restructuring of AeroTurbine will recede in 2017, just as the pace of the runoff of AER’s orderbook accelerates. We believe that as AER’s orderbook shrinks in dollar value terms, so will its overhang to AER’s share price (for more details, see our report, Aircraft Lessors: Growth at an Unreasonable Discount, dated November 14, 2016). Thus, we believe that as the orderbook declines through 2019, AER shares will appreciate at a rate in excess of book value/share growth. While we still believe aircraft lessor shares will generally trade in a range of 0.8x to 1.0x book value for 2017, we think that effect will decline in 2H17 and AER shares are positioned to benefit to the higher end of this range with the projected decline in its orderbook. Through 4Q17, we estimate this could lead to 27% appreciation in AER's share price."
Shares of AerCap Holdings closed at $42.33 yesterday.
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