On Tuesday, Compass Point reiterated a Buy rating and a $181.00 price target on FTAI Aviation (NASDAQ:FTAI), following the company's strategic capital initiative launch.
The initiative, aimed at acquiring on-lease 737NG and A320ceo aircraft, is expected to facilitate the deployment of approximately $3 billion of capital annually. This move is seen as a significant transformation for FTAI, potentially leading to a shift in the company's EBITDA mix towards its less capital-intensive aerospace products segment.
With a current market capitalization of $12.97 billion and impressive year-to-date returns of 176%, FTAI has shown strong momentum. According to InvestingPro analysis, the stock is currently trading above its Fair Value, despite analyst targets ranging from $132 to $300.
FTAI Aviation also disclosed the sale of 46 on-lease narrowbody aircraft for around $549 million. This sale is part of the broader strategic initiative that includes the implementation of FTAI's proprietary MRE solution for all engines involved in the partnership. This technology is anticipated to drive substantial growth in FTAI's aerospace products segment.
The capital initiative and aircraft sale are considered transformative steps for FTAI, making its business model significantly less reliant on capital and potentially warranting a higher valuation multiple. The shift towards a capital light aerospace product offering could lead to incremental multiple expansion and align with Compass Point's view that the company should be valued on a consolidated basis, rather than through a sum-of-the-parts (SOTP) methodology which would apply a lower multiple to the leasing segment.
Furthermore, FTAI has provided financial guidance for FY25, projecting EBITDA to be between $1.1 billion and $1.15 billion, a significant increase from the current EBITDA of $723 million. This forecast exceeds both the current estimate and consensus, suggesting a positive outlook for the company's financial performance.
The guidance, coupled with the strategic initiative, is expected to be well-received by investors, potentially leading to an uplift in FTAI's share value. InvestingPro data reveals strong revenue growth of 36.77% and indicates that analysts anticipate continued sales growth in the current year.
For deeper insights into FTAI's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, FTAI Aviation, maintained as a Buy by Jefferies with a target price of $188, is making strategic moves to bolster its growth.
The company has launched a $3 billion aircraft acquisition initiative, partnering with 3P private credit to invest in mid-life Boeing (NYSE:BA) 737NG and Airbus A320ceo aircraft. Analysts from BTIG, Deutsche Bank (ETR:DBKGn), and Stifel have also maintained their Buy ratings on the company, with BTIG raising its target price to $180.
FTAI Aviation has also sold 46 on-lease narrowbody aircraft for an estimated net purchase price of $549 million and provided financial guidance for fiscal year 2025, projecting an Adjusted EBITDA of approximately $1.1 to $1.15 billion. RBC Capital Markets has upgraded several companies in the Aerospace & Defense sector, including Hexcel (NYSE:HXL) Corporation and Raytheon Technologies (NYSE:RTX) Corp to 'Outperform', while downgrading General Dynamics Corp (NYSE:GD) and Vectrus Inc (NYSE:VVX) to 'Sector Perform'.
FTAI Aviation reported a 50% increase in Q3 2024 adjusted EBITDA, reaching $232 million. The company also sold its last two offshore energy vessels, Pioneer and Pride, for approximately $143 million. In partnership with Chromalloy, FTAI Aviation received Federal Aviation Administration approval for a key engine component, potentially doubling the company's EBITDA per engine module and reducing engine shop visit costs.
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