NEW YORK (TheStreet) -- Shares of Aircastle (AYR) are up a healthy 9% on the year. Yet investors may wonder why the stock is so drastically underperforming the airline index, which is up a whopping 40% on the year.
Aircastle CEO Ron Wainshal explained to TheStreet TV's Gregg Greenberg that his company's shares are up less than other more volatile airline-industry stocks because of Aircastle's more stable business model.
Aircastle acquires, leases and sells commercials jets. It's not extremely susceptible to the gyrations of the global economy, Wainshal said. Airlines, on the other hand, have a less stable business, and thrive during certain economic conditions and struggle in others, he said.
The airline business also has low margins, Wainshal noted. And while the airlines benefit greatly from falling fuel prices -- which is the largest input costs for these companies -- so does Aircastle, since demand for its aircraft increases.
Aircastle, with a market cap of $1.7 billion, has sold 37 aircrafts in the past nine months, bringing its fleet to 140 planes. The company continues to grow its portfolio, Wainshal added, and he expects to see further growth in the future.
The company's sales and leases aren't the only things growing either. In the third quarter, Aircastle announced a $100 million share buyback program, as well as a 10% boost to its dividend.
Aircastle now pays a 4.2% dividend yield, making it an attractive stock for income-oriented investors, Wainshal said. In 2015, the company will look to raise its dividend in the third quarter again, he commented.
Plus, the company is hedged against an interest rate hike, so it shouldn't have much affect on business, Wainshal concluded.
-- Written by Bret Kenwell
TheStreet Ratings team rates AIRCASTLE LTD as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate AIRCASTLE LTD (AYR) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth, compelling growth in net income, revenue growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
You can view the full analysis from the report here: AYR Ratings Report