Tweet
($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
Diff'rent Strokes was a popular American sitcom that aired from 1978 to 1986. It revolved around the lives of two young brothers, Arnold and Willis Jackson, who were adopted by a wealthy Park Avenue businessman, Phillip Drummond. The brothers, originally from Harlem, navigate the cultural and socioeconomic differences between their old and new lives while facing various challenges and adventures. The show often explored themes of family, friendship, and growing up, as well as the contrast between the wealthy and working-class lifestyles. However, whenever things got off the rails for Arnold, he would famously exclaim, ““Whatchoo Talkin’ ‘Bout, Willis?!”
In scouring the markets for a company that is growing its revenues and earnings with significant price momentum while still trading at a very reasonable valuation, one need look no further than “Whatchoo Talkin’ ‘Bout, Willis?!”
Yesterday I bought stock in Willis Lease Finance Corporation (WLFC) at 107.58. I will sell it in 4 to 6 weeks at 124.26. Here’s why I like WLFC:
Look at this great chart:
This stock price is up 155% in the last 12 months yet its PE is only 8.5. Meanwhile the S&P 500 was only up 26%. How can this be? It’s simple, this company has an operating margin of 51%. It literally makes money standing still!
How does it work? We all own automobiles, right? However from time to time we need to rent one when our car is in the shop. The same goes for airplane engines. Every airline owns airplanes and own their own engines. However, from time to time, the engines need maintenance but you don’t want the plane sitting idle. So you swap out the engines. Who has the engines to rent? ““Whatchoo Talkin’ ‘Bout, Willis?!”
Willis Lease is the premier independent jet engine lessor in the commercial finance space and has been a pioneer in aviation solutions for over 45 years. As a long-established industry leader with a trusted reputation and global footprint, not only does Willis Lease offer innovative leasing solutions for the highest demand engines for Airbus and Boeing aircraft, but the Willis Lease platform provides its diverse customer base with industry leading trading, materials, and asset management offerings. Willis Aero’s inventory stock is comprised primarily of current generation, in demand, engine types and has a history of successfully assisting its customers in driving down the price of costly shop-visits.
Last year was a remarkable year for Willis. The company set an all-time record for its total annual revenue, as well as lease and maintenance reserve receipts, and the second highest record for overall earnings before taxes. These results were predominantly driven by core, recurring lease and maintenance revenues associated with a strong, resurging aviation marketplace. People are flying more than ever! Despite the circus we see in the airports, people are being drawn to the skies like flies on poop.
Entering the post-pandemic era, a combination of adversities in the industry – including original equipment manufacturer challenges, supply chain disruptions, maintenance facility bottlenecks, and skilled labor shortages – has created a significant demand for spare engine leasing. Willis’ decision to strategically expand into aviation services aimed at delivering greater value to customers has proven prudent. They supply surplus engine material to the global aviation industry, delivering parts for nearly every modern engine type to airlines and repair centers. In order for the airlines to stay profitable, the planes need to keep flying. Willis is the mechanic with the golden touch! Their availability of parts inventory reduces the costs and turn times of engine repairs. Armed with the economy of scale, Willis dominates the data science world when it comes to engine and engine parts inventory. No other competitor can touch them. They can accurately predict the timing and cost of shop visits across entire fleets for their customers. This predictive capability helps WLFC offer customers leasing solutions and better reliability for their flight schedules. Their FAA-certified repair stations are strategically located in both the US and the UK, specializing in conducting shop visits and repairs that minimize wait times. The really good news for WLFC is that there is a scarcity of spare engines throughout the world. But Willis stocked up on engines when they were going for cheap when planes were not flying during the pandemic. This might have been the greatest trade in history. Almost better than $$$MR. MARKET$$$. Now, these guys can name their price on rentals because there is a barrier to entry for others to try to jump in and get their taste of this lucrative business.
WLFC has been providing these leasing services for over 45 years. WLFC has since purchased, leased, and sold more engines in more countries over a longer period of time than any independent competitor. They have grown the number of engines under its management from 40 in 2015 to 289 in 2020. As more aircraft is rolled out, the demand for leasing engines will continue to grow. Charles F Willis Jr., the father of the founder of WLFC, was a commander in the Navy who earned the Distinguished Flying Cross three times, three Air Medals, and a Purple Heart. After the war, he engaged in Eisenhower's campaign before becoming the president's staff (assistant to the assistant to the president). Then, he entered the private sector and served as the chairman and CEO of Alaska Airlines from 1957 until 1972. He was buried at the Arlington National Cemetery. Willis Jr's son, Charles F Willis IV, founded WLFC. Austin Chandler Willis, the current CEO of WLFC and the son of Charles F Willis IV, founded and operated 2 aviation part sale and management-related firms. It’s really quite a legacy. This company really is a family business, but most successful family businesses operate under the philosophy that your family name is the most precious thing you own and that old school business relationships are really partnerships based on trust.
Okay…a very touching story perhaps? What does it mean for earnings??
These are record revenues driven by strong lease rent and maintenance reserve revenues, bolstered by heightened asset usage and strategic acquisitions of aircraft and engines. The company's strategic investments in leasing and maintenance services supported robust financial performance.
Lease rent revenues were a record $55.9 million, up 2.7% from $54.4 million in the second quarter of 2023. This growth was driven by the acquisition of new assets, including three aircraft and 11 engines, enhancing the lease portfolio.
Maintenance reserve revenues increased significantly to $62.9 million, up 77.6% from $35.4 million in the second quarter of 2023. This spike was fueled by heightened asset usage by customers, generating substantial short-term maintenance revenues of $45.9 million and long-term maintenance revenues of $17 million.
Spare parts and equipment sales rose to $6.2 million from $4.6 million in the previous year, reflecting variations in sales timing and increased demand for spare parts.
The company recorded a gain of $14.4 million from the sale of seven engines and other leased equipment, a 223.4% increase compared to $4.5 million in the second quarter of 2023.
The company declared its first regular quarterly dividend of 25 cents per share, payable on Aug 21, 2024, with a record date of Aug 12, 2024. Additionally, a special dividend of $1.00 per share was paid in the second quarter of 2024.
At the end of the day, with a return on equity of almost 18%, this company can easily expand its PE multiple from 8.5 to 10. With a trailing 12 month EPS of 12.89, you’re looking at a stock price of $12.89 x 10 = $128.90 which exceeds my price target and that assumes no earnings growth! All I can say about this is ““Whatchoo Talkin’ ‘Bout, Willis?!”. I am taking this one to the pay window all day!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Diff'rent Strokes was a popular American sitcom that aired from 1978 to 1986. It revolved around the lives of two young brothers, Arnold and Willis Jackson, who were adopted by a wealthy Park Avenue businessman, Phillip Drummond. The brothers, originally from Harlem, navigate the cultural and socioeconomic differences between their old and new lives while facing various challenges and adventures. The show often explored themes of family, friendship, and growing up, as well as the contrast between the wealthy and working-class lifestyles. However, whenever things got off the rails for Arnold, he would famously exclaim, ““Whatchoo Talkin’ ‘Bout, Willis?!”
In scouring the markets for a company that is growing its revenues and earnings with significant price momentum while still trading at a very reasonable valuation, one need look no further than “Whatchoo Talkin’ ‘Bout, Willis?!”
Yesterday I bought stock in Willis Lease Finance Corporation (WLFC) at 107.58. I will sell it in 4 to 6 weeks at 124.26. Here’s why I like WLFC:
Look at this great chart:
This stock price is up 155% in the last 12 months yet its PE is only 8.5. Meanwhile the S&P 500 was only up 26%. How can this be? It’s simple, this company has an operating margin of 51%. It literally makes money standing still!
How does it work? We all own automobiles, right? However from time to time we need to rent one when our car is in the shop. The same goes for airplane engines. Every airline owns airplanes and own their own engines. However, from time to time, the engines need maintenance but you don’t want the plane sitting idle. So you swap out the engines. Who has the engines to rent? ““Whatchoo Talkin’ ‘Bout, Willis?!”
Willis Lease is the premier independent jet engine lessor in the commercial finance space and has been a pioneer in aviation solutions for over 45 years. As a long-established industry leader with a trusted reputation and global footprint, not only does Willis Lease offer innovative leasing solutions for the highest demand engines for Airbus and Boeing aircraft, but the Willis Lease platform provides its diverse customer base with industry leading trading, materials, and asset management offerings. Willis Aero’s inventory stock is comprised primarily of current generation, in demand, engine types and has a history of successfully assisting its customers in driving down the price of costly shop-visits.
Last year was a remarkable year for Willis. The company set an all-time record for its total annual revenue, as well as lease and maintenance reserve receipts, and the second highest record for overall earnings before taxes. These results were predominantly driven by core, recurring lease and maintenance revenues associated with a strong, resurging aviation marketplace. People are flying more than ever! Despite the circus we see in the airports, people are being drawn to the skies like flies on poop.
Entering the post-pandemic era, a combination of adversities in the industry – including original equipment manufacturer challenges, supply chain disruptions, maintenance facility bottlenecks, and skilled labor shortages – has created a significant demand for spare engine leasing. Willis’ decision to strategically expand into aviation services aimed at delivering greater value to customers has proven prudent. They supply surplus engine material to the global aviation industry, delivering parts for nearly every modern engine type to airlines and repair centers. In order for the airlines to stay profitable, the planes need to keep flying. Willis is the mechanic with the golden touch! Their availability of parts inventory reduces the costs and turn times of engine repairs. Armed with the economy of scale, Willis dominates the data science world when it comes to engine and engine parts inventory. No other competitor can touch them. They can accurately predict the timing and cost of shop visits across entire fleets for their customers. This predictive capability helps WLFC offer customers leasing solutions and better reliability for their flight schedules. Their FAA-certified repair stations are strategically located in both the US and the UK, specializing in conducting shop visits and repairs that minimize wait times. The really good news for WLFC is that there is a scarcity of spare engines throughout the world. But Willis stocked up on engines when they were going for cheap when planes were not flying during the pandemic. This might have been the greatest trade in history. Almost better than $$$MR. MARKET$$$. Now, these guys can name their price on rentals because there is a barrier to entry for others to try to jump in and get their taste of this lucrative business.
WLFC has been providing these leasing services for over 45 years. WLFC has since purchased, leased, and sold more engines in more countries over a longer period of time than any independent competitor. They have grown the number of engines under its management from 40 in 2015 to 289 in 2020. As more aircraft is rolled out, the demand for leasing engines will continue to grow. Charles F Willis Jr., the father of the founder of WLFC, was a commander in the Navy who earned the Distinguished Flying Cross three times, three Air Medals, and a Purple Heart. After the war, he engaged in Eisenhower's campaign before becoming the president's staff (assistant to the assistant to the president). Then, he entered the private sector and served as the chairman and CEO of Alaska Airlines from 1957 until 1972. He was buried at the Arlington National Cemetery. Willis Jr's son, Charles F Willis IV, founded WLFC. Austin Chandler Willis, the current CEO of WLFC and the son of Charles F Willis IV, founded and operated 2 aviation part sale and management-related firms. It’s really quite a legacy. This company really is a family business, but most successful family businesses operate under the philosophy that your family name is the most precious thing you own and that old school business relationships are really partnerships based on trust.
Okay…a very touching story perhaps? What does it mean for earnings??
- Willis Lease Finance Corporation WLFC reported earnings per share (EPS) of $6.21 in the second quarter of 2024, a significant increase from $2.02 in the prior-year quarter.
- The company's total revenues reached $151.1 million, up 38.6% from $109 million in the same period last year.
These are record revenues driven by strong lease rent and maintenance reserve revenues, bolstered by heightened asset usage and strategic acquisitions of aircraft and engines. The company's strategic investments in leasing and maintenance services supported robust financial performance.
Lease rent revenues were a record $55.9 million, up 2.7% from $54.4 million in the second quarter of 2023. This growth was driven by the acquisition of new assets, including three aircraft and 11 engines, enhancing the lease portfolio.
Maintenance reserve revenues increased significantly to $62.9 million, up 77.6% from $35.4 million in the second quarter of 2023. This spike was fueled by heightened asset usage by customers, generating substantial short-term maintenance revenues of $45.9 million and long-term maintenance revenues of $17 million.
Spare parts and equipment sales rose to $6.2 million from $4.6 million in the previous year, reflecting variations in sales timing and increased demand for spare parts.
The company recorded a gain of $14.4 million from the sale of seven engines and other leased equipment, a 223.4% increase compared to $4.5 million in the second quarter of 2023.
The company declared its first regular quarterly dividend of 25 cents per share, payable on Aug 21, 2024, with a record date of Aug 12, 2024. Additionally, a special dividend of $1.00 per share was paid in the second quarter of 2024.
At the end of the day, with a return on equity of almost 18%, this company can easily expand its PE multiple from 8.5 to 10. With a trailing 12 month EPS of 12.89, you’re looking at a stock price of $12.89 x 10 = $128.90 which exceeds my price target and that assumes no earnings growth! All I can say about this is ““Whatchoo Talkin’ ‘Bout, Willis?!”. I am taking this one to the pay window all day!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Comment