AER: Tight Aircraft Supply And Capital Deployment Will Continue To Support Future Returns

AerCap Holdings’ fair value estimate has inched higher from approximately $148 to $149.22 per share as analysts, citing a strong quarter, improved profitability assumptions, and expectations for a sustained tight aircraft leasing market with robust capital deployment, lift their price targets into the mid $150s.

Analyst Commentary

Street research updates reflect a broadly constructive stance on AerCap, with multiple price target hikes into the $150 range as analysts recalibrate models following an exceptional quarter and a still tight aircraft leasing market.

Bullish Takeaways

Bullish analysts see capital deployment as a key value driver, expecting share repurchases and disciplined growth investments to support upside to intrinsic value.
Several models incorporate a prolonged period of tight supply for new narrowbody and widebody aircraft, which is viewed as supportive of lease rate strength and above historical returns.
Higher aircraft asset values and AerCap's demonstrated ability to reposition assets quickly and efficiently are cited as structural advantages that justify higher valuation multiples.
Estimate revisions following recent results reflect confidence in management execution and earnings durability, leading to upward adjustments in both near term and mid term profit forecasts.

Bearish Takeaways

Bearish analysts, while acknowledging strong fundamentals, argue that the current share price already discounts much of the favorable supply demand backdrop, limiting multiple expansion.
Some remain cautious that a normalization in OEM production levels or easing supply constraints over time could moderate lease yields and compress asset values.
There is residual concern that elevated capital deployment plans may increase sensitivity to shifts in funding costs or macro conditions if executed too aggressively.
Valuation frameworks that emphasize mean reversion in aircraft values and returns on equity highlight the risk that current profitability metrics may not be fully sustainable over the long term.

What's in the News

The Board of Directors has authorized a new share repurchase plan that enables AerCap to buy back up to $1 billion of its shares through June 30, 2026, funded by cash on hand and operating cash flow (company announcement).
AerCap has completed multiple buyback tranches in 2025, repurchasing over $1.2 billion of stock across several programs, reducing the share count and returning capital to shareholders (company filings).
Lease agreements have been signed with Uzbekistan-based cargo carrier My Freighter for two new Airbus A321neo aircraft, scheduled for delivery in the fourth quarter of 2027, expanding AerCap's freighter portfolio (client announcement).
The first of three Boeing 777 300ERSF converted freighters has been delivered to Fly Meta Leasing, with additional deliveries slated for 2026, marking early deployment of the newly certified Big Twin conversion program (client announcement).
A new multi-aircraft transaction has been signed with FlySafair for three Boeing 737 MAX 8 and two 737 800NG aircraft, with deliveries beginning in 2026 and 2028, reinforcing AerCap's role in supporting low-cost carrier fleet growth (client announcement).

Valuation Changes

The Fair Value Estimate has risen slightly, from approximately $148.00 to about $149.22 per share, reflecting a modest upward revision in intrinsic value.
The Discount Rate is effectively unchanged, remaining at roughly 13.46 percent, indicating no material shift in the perceived risk profile.
Revenue growth has improved modestly, with the long-term growth assumption moving from about negative 0.48 percent to approximately negative 0.44 percent.
The Net Profit Margin has increased significantly, rising from roughly 14.00 percent to about 19.03 percent, implying stronger expected profitability.
The future P/E multiple has fallen meaningfully, from about 25.0x to roughly 18.5x, suggesting a lower valuation multiple applied to forward earnings despite higher margin expectations.

Tight aircraft supply and strong demand for newer models are driving higher lease rates, asset values, and net margins for AerCap.
Diversification into ancillary services and disciplined capital management are fueling earnings growth and positioning the company for further expansion.
Market oversupply, slower growth post-expansion, leverage risks, client concentration, and potential weakening industry conditions all threaten AerCap's long-term cash flow and profitability.

Catalysts

About AerCap Holdings

Engages in the lease, financing, sale, and management of commercial flight equipment in the United States, China, and internationally.What are the underlying business or industry changes driving this perspective?

Robust, broad-based growth in global passenger and especially international air travel, led by APAC and the Middle East, continues to drive high aircraft utilization (99%) and lease extension rates (97%), supporting stable and accelerating lease revenues.
Sustained supply chain constraints and OEM production delays are keeping aircraft and engine supply tight, pushing lease rates higher and boosting asset values, thereby expanding AerCap's net margins and supporting gains on asset sales.
Accelerated airline fleet renewal and persistent customer demand for newer, fuel-efficient aircraft (evidenced by high lease extensions, especially for widebodies and new-technology narrowbodies) underpin long-term visibility into future lease revenue streams and higher average lease rate factors.
Expansion of ancillary services, particularly AerCap's spare engine leasing and new engine/MRO partnerships such as the Air France-KLM JV, diversify revenue sources and add higher-margin income streams, positively impacting overall earnings growth.
Prudent capital allocation, supported by a strong balance sheet and ongoing deleveraging, positions AerCap to capture opportunities in sale-leasebacks and organic fleet growth as OEM deliveries ramp up, driving revenue and earnings upside while containing interest expense.

AerCap Holdings Earnings and Revenue Growth

AerCap Holdings Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming AerCap Holdings's revenue will grow by 1.7% annually over the next 3 years.
Analysts assume that profit margins will shrink from 36.9% today to 16.9% in 3 years time.
Analysts expect earnings to reach $1.4 billion (and earnings per share of $8.89) by about August 2028, down from $2.9 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.7x on those 2028 earnings, up from 6.8x today. This future PE is lower than the current PE for the US Trade Distributors industry at 22.7x.
Analysts expect the number of shares outstanding to decline by 5.7% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 13.28%, as per the Simply Wall St company report.

AerCap Holdings Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The ramp-up of OEM aircraft deliveries over the next few years could lead to an oversupply in the leasing market, increasing competition and potentially compressing lease rates, which would pressure AerCap's revenue growth and asset values.
AerCap's forward order book and contracted CapEx begin to decelerate after 2027, indicating that the company may face challenges in maintaining long-term, double-digit earnings growth as organic fleet expansion opportunities slow, potentially impacting future revenue and EPS growth.
The company's continued deployment of large amounts of capital into new equipment and share repurchases, while leverage remains below historical targets, raises the risk that higher leverage or market downturns could increase debt-servicing costs and negatively affect net margins and profitability during downcycles.
Customer concentration risk remains a concern, particularly as some airline clients (e.g., Azul) face financial distress or bankruptcy; this increases the risk of credit losses or asset impairments, which could impact AerCap's earnings reliability.
The eventual easing of today's strong market conditions (e.g., high lease extension rates, supply constraints, robust engine demand) due to broader macroeconomic shifts, industry cycles, or changing secular trends (like suppressed business travel due to remote work or new environmental regulations) could undermine long-term predictable cash flows and profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $132.0 for AerCap Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $8.4 billion, earnings will come to $1.4 billion, and it would be trading on a PE ratio of 19.7x, assuming you use a discount rate of 13.3%.
Given the current share price of $115.19, the analyst price target of $132.0 is 12.7% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Boost AerCap Price Target as Profit Margins Improve and Valuation Outlook Strengthens