FTAI Aerospace (FTAI) Still Firing
Shares of FTAI Aerospace (FTAI) are firmly in the green and hitting a new high today, bucking the market’s downward move. The reason was another good quarterly report that beat expectations (adjusted EBITDA of $214 million versus consensus of $177 million), delivered yesterday after the bell. You may see the company reported an off-trend EPS loss (-$2.26). This is not a concern as it was due to the $300 million impact of internalizing the company’s management structure, which I discussed as a positive previously in a Special Bulletin.
I listened to the conference call this morning. I think the high-level story is a lot more interesting than all the numbers so I’m only going to frame that.
FTAI is in the airplane engine maintenance business, and they also lease and sell refurbished engines. They work on the most popular engines in the world, which are in very high demand because the supply chain for new engines is all messed up. This will get fixed eventually (and will be gradual), but not for several years (estimates suggest 2026 to 2030, so maybe 2028?).
FTAI wants airlines to outsource their engine work to the company, and they have a core competency in that area. Many other players in the market (like those that only lease engines) are in the maintenance avoidance business, and they try to offload the maintenance to the airlines, who pretty much stink at it.
This is a pain point that FTAI solves, and they can offer lower costs and much quicker turnaround times (like a few weeks versus several months in many cases). It’s sort of like if your car’s engine isn’t working well and you go to the dealer and they say they’ll have it rebuilt in four months for $10K, but you learn of a company with refurbished engines that run like a top that can get the job done for $6K and have your car back in a week. Not a tough choice, right?
FTAI only has about 5% of the market despite having capacity to handle 15% of it. There is a lot of room to grow with the asset base the company currently has.
Two years ago management said their goal was to generate $1 billion of EBITDA in 2026. The company just increased 2024 guidance and now calls for $500 million in EBITDA this year. So it’s halfway to its goal. It just raised its goal to $1.25 billion in EBITDA in 2026.
The stock is still a buy. BUY
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