When AerCap Holdings NV (NYSE:AER) released its most recent earnings update (31 March 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were AerCap Holdings’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not AER actually performed well. Below is a quick commentary on how I see AER has performed. See our latest analysis for AerCap Holdings
Commentary On AER’s Past PerformanceAER’s trailing twelve-month earnings (from 31 March 2018) of US$1.08b has declined by -0.40% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 27.85%, indicating the rate at which AER is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and if the whole industry is experiencing the hit as well.
Revenue growth in the last couple of years, has been positive, however, earnings growth has failed to keep up meaning AerCap Holdings has been growing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US trade distributors industry has been growing its average earnings by double-digit 27.29% in the past twelve months, and a more subdued 6.37% over the past five years. This means whatever tailwind the industry is benefiting from, AerCap Holdings has not been able to reap as much as its average peer.In terms of returns from investment, AerCap Holdings has not invested its equity funds well, leading to a 12.54% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 5.13% is below the US Trade Distributors industry of 6.01%, indicating AerCap Holdings’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for AerCap Holdings’s debt level, has declined over the past 3 years from 3.44% to 3.34%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 264.07% to 334.06% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. You should continue to research AerCap Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AER’s future growth? Take a look at our free research report of analyst consensus for AER’s outlook.
- Financial Health: Is AER’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.