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Why FTAI Aviation Stock Popped on Thursday
Key Points
FTAI Aviation reported strong earnings this morning, but free cash flow still seems to be negative.
The share price has languished this year, and management is promising a big stock buyback.
Shares of FTAI Aviation (NASDAQ:FTAI), an aircraft and aircraft engine leasing company, took off after reporting Q3 earnings Thursday and flew 14.5% higher through 1:40 p.m. ET.
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FTAI Aviation Q3 earnings
FTAI reported $977.7 million in Q3 revenue, up 46.6% from one year ago, and earned $150.6 million in profit -- up 28%. Earnings per share did even better, rising 30% year over year to $1.43.
The results appear to have come as a pleasant surprise to Wall Street and investors alike, who had been selling off FTAI stock this year -- and the stock is still down 10% over the past year, even after today's rally.
What's next for FTAI stock
As for FTAI itself, it's taking advantage of its stock price's continued weakness to "accelerate" its share buybacks, announcing it will double its repurchase authorization to $1 billion, which, if implemented in full, could retire more than 6% of shares outstanding.
CEO Joe Adams says he has "clear visibility into 2027" to support the repurchases -- but I'm not so sure. For one thing, FTAI doesn't actually have $1 billion to spend. It's showing a bit less than $386 million on its balance sheet, against long-term debt of more than $3.45 billion.
FTAI also lacks free cash flow with which to fund the buybacks. Although the company didn't include a cash flow statement with its earnings release, data from S&P Global Market Intelligence show that FTAI burned through nearly $516 million in negative free cash flow in the first half of this year.
Long story short, if FTAI wants to buy back its shares, it'll probably need to go (further) into debt to do it.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ftai Aviation. The Motley Fool has a disclosure policy.