AER: Tight Aircraft Supply And Capital Deployment Will Continue To Support Future Returns

AerCap Holdings’ fair value estimate has inched higher from approximately $148 to $149.22 per share as analysts, citing a strong quarter, improved profitability assumptions, and expectations for a sustained tight aircraft leasing market with robust capital deployment, lift their price targets into the mid $150s.

Analyst Commentary

Street research updates reflect a broadly constructive stance on AerCap, with multiple price target hikes into the $150 range as analysts recalibrate models following an exceptional quarter and a still tight aircraft leasing market.

Bullish Takeaways

• Bullish analysts see capital deployment as a key value driver, expecting share repurchases and disciplined growth investments to support upside to intrinsic value.
• Several models incorporate a prolonged period of tight supply for new narrowbody and widebody aircraft, which is viewed as supportive of lease rate strength and above historical returns.
• Higher aircraft asset values and AerCap's demonstrated ability to reposition assets quickly and efficiently are cited as structural advantages that justify higher valuation multiples.
• Estimate revisions following recent results reflect confidence in management execution and earnings durability, leading to upward adjustments in both near term and mid term profit forecasts.

Bearish Takeaways

• Bearish analysts, while acknowledging strong fundamentals, argue that the current share price already discounts much of the favorable supply demand backdrop, limiting multiple expansion.
• Some remain cautious that a normalization in OEM production levels or easing supply constraints over time could moderate lease yields and compress asset values.
• There is residual concern that elevated capital deployment plans may increase sensitivity to shifts in funding costs or macro conditions if executed too aggressively.
• Valuation frameworks that emphasize mean reversion in aircraft values and returns on equity highlight the risk that current profitability metrics may not be fully sustainable over the long term.

What's in the News

• The Board of Directors has authorized a new share repurchase plan that enables AerCap to buy back up to $1 billion of its shares through June 30, 2026, funded by cash on hand and operating cash flow (company announcement).
• AerCap has completed multiple buyback tranches in 2025, repurchasing over $1.2 billion of stock across several programs, reducing the share count and returning capital to shareholders (company filings).
• Lease agreements have been signed with Uzbekistan-based cargo carrier My Freighter for two new Airbus A321neo aircraft, scheduled for delivery in the fourth quarter of 2027, expanding AerCap's freighter portfolio (client announcement).
• The first of three Boeing 777 300ERSF converted freighters has been delivered to Fly Meta Leasing, with additional deliveries slated for 2026, marking early deployment of the newly certified Big Twin conversion program (client announcement).
• A new multi-aircraft transaction has been signed with FlySafair for three Boeing 737 MAX 8 and two 737 800NG aircraft, with deliveries beginning in 2026 and 2028, reinforcing AerCap's role in supporting low-cost carrier fleet growth (client announcement).

Valuation Changes

• The Fair Value Estimate has risen slightly, from approximately $148.00 to about $149.22 per share, reflecting a modest upward revision in intrinsic value.
• The Discount Rate is effectively unchanged, remaining at roughly 13.46 percent, indicating no material shift in the perceived risk profile.
• Revenue growth has improved modestly, with the long-term growth assumption moving from about negative 0.48 percent to approximately negative 0.44 percent.
• The Net Profit Margin has increased significantly, rising from roughly 14.00 percent to about 19.03 percent, implying stronger expected profitability.
• The future P/E multiple has fallen meaningfully, from about 25.0x to roughly 18.5x, suggesting a lower valuation multiple applied to forward earnings despite higher margin expectations.