Fly Leasing: A High Yielder To Buy Before Earnings

Nov. 4.13 | About: Fly Leasing (FLY)

I am a big fan of stocks that report results later in the earnings calendar. This gives an investor an advantage to buy or sell shares depending on how other companies in the same industry are doing. A perfect example of this advantage is embodied in the stock of aircraft lessor Fly Leasing (NYSE:FLY).

This high yielder has seen two of its competitors report stellar results ahead of its own earnings report that should hit the market on Thursday.

  • AerCap Holdings N.V. (NYSE:AER) reported earnings before the bell Monday. The company easily beat consensus expectations. It earned 79 cents a share, 17 cents above expectations. Revenue was ~8% above consensus.
  • This follows solid results from Aircastle Limited (NYSE:AYR) last Thursday. The company posted earnings of 34 cents a share, nine cents a share above estimates. Quarterly revenue was more than 2% above consensus as well.

I think strength in the industry puts a high probability that FLY beats when it reports earnings later this week. In addition, the company has crushed expectations two of the last three quarters (FLY slightly beat earnings expectations the other quarter). It is one of the reasons I will be adding to my existing position prior to quarterly results. In addition, there are other reasons this high yielder looks attractive at current prices.

Company Overview:

Fly Leasing Limited acquires, finances, leases, and sells commercial jet aircraft worldwide. It has over 200 commercial planes in its portfolio. The company is based in the low tax domicile of Ireland.

4 additional reasons FLY is a good pick up for an income investor at ~$14.50 a share:

  1. The shares yield better than six percent (6.1%) which is substantially higher than its two competitors listed above.
  2. The shares are cheap at ~70% of book value and under 11x forward earnings.
  3. The six analysts that cover the stock have a median price target of just under $18 a share on FLY, significantly above the current price of this high yielder.
  4. After coming in flat this year, revenue growth should clock in at just over 10% in FY2014. The company has acquired seven B737-800s this year, further expanding its fleet of modern aircraft on lease to major airlines around the world. These additions to FLY's portfolio will increase cash flow and earnings per share.

Disclosure: I am long FLY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.