Out Fox The $treet

AerCap (AER) has one amazing chart over the last couple of months. The merger with Genesis Lease (GLS) should be finalized on the 25th reducing the risk and finally allowing the stock to move forward. Hard to understand what caused the stock to collapse from $11 to $7.5 and then rebound right back to $11 today. Is it now a double top? Likely not, but it does need to consolidate the recent gains. See the RF chart from yesterday as thats the likely scenario for this stock. Trading at only 5.5x the $2 in earnings expected this year the stop at $11 will likely only be short term if at all. Disclosure: Long AER and GLS

Anybody just focusing on domestic US traffic would miss how the rest of the world is seeing explosive growth in airplane traffic. For airplane lessors it's mostly about international growth and with Boeing continuing to struggle to get their new plane out it just makes the planes owned by lessors like AerCap (AER) and Genesis Lease (GLS) more valuable. Below is a couple of examples of the explosive growth seen outside the US and in places other then China and India. LAN Airlines (IFL) is one of the leading airlines in Latin America with a dominant position in Chile and Peru plus operations in Argentina and Ecuador. They reported a huge 11.9% increase in system traffic for September. System passenger traffic for September increased 11.9% as capacity rose 9.3%. As a result, the Company's load factor increased 1.8 points to 78.8%. International passenger traffic accounted for approximately 71% of total passenger traffic. Domestic passenger traffic in Chile, Argentina, Peru and Ec...

This expected merger was announced on Friday morning. Its expected to create the largest independent airplane lessor in the world with a market cap just over $1B. Its also expected to create a serious increases to the 2010 EPS estimates for Genesis Lease (GLS) shareholders per slide 9 of the merger presentation. The estimate goes from $0.77 to $1.75. That has to be the largest increase Stone Fox Capital has ever seen on a merger announcement. At the same time it also enhances the Leasing EPS for AerCap (AER) slightly. This is important because analysts and investors typically prefer a steady recurring revenue stream over the lumpy earnings that AER typically generates from airplane and engine sales. Adding in those earnings give the potential for an EPS total closer to $2 for 2010. Whats amazing is that the stock for AER trades sub $9 at the close. This for a stock expected to earn $2 in 2009 and 2010. So why does the stock trade at a sub 5 PE? Its really difficult to answer that que...

In a rather unusual twist, Genesis Lease (GLS) confirms that they are actually in M&A discussions backing up a earlier story today. No guarantee that it will work out, but it's surprising to see that the article was at least partially accurate. In the past it tends to work out that such articles are only half accurate. The article suggested that AerCap (AER) was in the process of buying GLS for a 40% premium or a price that would work out to $9.60. So don't be surprised if it's actually another acquirer or if the purchase price is materially different. The deal would still be way below the $14 book value of GLS, but Stone Fox Capital has argued that since AER also trades at a similar BV discount it'd be advantageous for GLS shareholders to take the 40% bump and then participate in any AER rally. A rally likely to be quicker with the attention such a deal would bring. In addition, we suggested just less then a month ago that AER was the best investment in the airpl...

The airplane leasing sector has been promising for a while now as emerging markets expand air traffic and airlines with weak balance sheets look to cut cash outlays for new planes. Its also a much better way to play this trend then to own a airline as they typically struggle to make profits with the fierce competition in the sector yet every time we turn around another company wants to open an airline. Owning one seems like a status symbol similar to a sports franchise except airlines almost always lose value. Airplane lessors on the other hand are typically very profitable. The airplanes typically hold their values and during a period where both Boeing (BA) and Airbus struggle to get new versions out, the planes on hand remain in high demand. Its also an attractive investment because the leases are typically for 5-7 years providing for a consistent return. Unfortunately though the stock prices are not nearly as consistent. Fears of bankruptcies in the industry (leases can be canceled)...

While the rest of the airline leasing business has been busy buying either new planes from Airbus or Boeing or working out sale/leaseback arrangemetns with cash strapped carriers, GLS has stayed on the sidelines unwilling to tap its large credit line. At least, until today. GLS announced the purchase of a new A321 and leaseback to US Air. This is significant from a macro economic view because GLS has been on the sidelines all this time. Evidently management sees a bottom in the airplane leasing segment. Their management is widely respected for having performed well at other companies during downturns. The PR also had a hidden announcement that GLS has all 55 aircraft leased now. This is significant because they had 2 aircraft unleased as of the last announcement and its very positive to see them fully booked during the worst economic climate in 70 years. This acquisition now means Genesis has 55 aircraft on lease to 36 airline customers in 21 countries. Considering they and other leasi...