Aerospace and defense company AerSale (NASDAQ:ASLE) beat Wall Street’s revenue expectations in Q4 CY2024, but sales were flat year on year at $94.74 million. Its non-GAAP profit of $0.09 per share was in line with analysts’ consensus estimates.
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AerSale (ASLE) Q4 CY2024 Highlights:
- Revenue: $94.74 million vs analyst estimates of $91.63 million (flat year on year, 3.4% beat)
- Adjusted EPS: $0.09 vs analyst estimates of $0.09 (in line)
- Adjusted EBITDA: $13 million vs analyst estimates of $7.59 million (13.7% margin, 71.3% beat)
- Operating Margin: 5.2%, up from -1.1% in the same quarter last year
- Free Cash Flow was $17.28 million, up from -$9.69 million in the same quarter last year
- Market Capitalization: $370.9 million
Company Overview
Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ:ASLE) delivers full-service support to mid-life commercial aircraft.
Aerospace
Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last four years, AerSale grew its sales at an excellent 13.4% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. AerSale’s recent history marks a sharp pivot from its four-year trend as its revenue has shown annualized declines of 8.1% over the last two years. 
AerSale also breaks out the revenue for its most important segments, Products and Services, which are 65.8% and 25.9% of revenue. Over the last two years, AerSale’s Products revenue averaged 7.7% year-on-year declines. On the other hand, its Services revenue averaged 3.1% growth.
This quarter, AerSale’s $94.74 million of revenue was flat year on year but beat Wall Street’s estimates by 3.4%.
Looking ahead, sell-side analysts expect revenue to grow 12.1% over the next 12 months, an improvement versus the last two years. This projection is admirable and indicates its newer products and services will catalyze better top-line performance.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
AerSale was profitable over the last five years but held back by its large cost base. Its average operating margin of 7.4% was weak for an industrials business.
Looking at the trend in its profitability, AerSale’s operating margin decreased by 2.6 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. . AerSale’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.
This quarter, AerSale generated an operating profit margin of 5.2%, up 6.3 percentage points year on year. This increase was a welcome development and shows it was recently more efficient because its expenses grew slower than its revenue.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Sadly for AerSale, its EPS declined by 9.5% annually over the last four years while its revenue grew by 13.4%. This tells us the company became less profitable on a per-share basis as it expanded.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For AerSale, its two-year annual EPS declines of 61.4% show it’s continued to underperform. These results were bad no matter how you slice the data.
In Q4, AerSale reported EPS at $0.09, up from negative $0 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects AerSale to perform poorly. Analysts forecast its full-year EPS of $0.18 will hit $0.48.
Key Takeaways from AerSale’s Q4 Results
We were impressed by how significantly AerSale blew past analysts’ EBITDA expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this was a solid quarter. The stock traded up 5.9% to $7.50 immediately after reporting.
AerSale had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
