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Air Lease Corp.: Sustainable/Predictable Growth, Insulated Business Model (>20% Upside)

Air Lease Corp. (NYSE:AL)

Buy: Price Target (12/31/2015)= $43.24

Take Away- Air Lease, which leases planes to airlines throughout the globe, is reliant upon growth in air traffic to continue to lease out its planes. IATA (International Air Transport Association) is maintaining a 5% global growth outlook for air traffic growth despite investor concern about growth in 2015. Strong air traffic growth mixed with a robust and transparent pipeline for 2015 (100% booked), which includes 37 planes being delivered throughout the year, as well as management's keen ability to resell its older planes at favorable prices, will be able to continue its top and bottom line growth. Airlines are in the middle of an upgrade cycle due to aging fleets. Add in the increased incremental revenue, and decrease in overhead costs from newer planes, thus painting a bright picture for the demand of new planes in the out years. In regards to costs, AL has successfully lowered its composite debt yield, turned its debt breakdown to be overwhelmingly fixed interest notes (76%), and turned its debts to predominately unsecuritized debt while getting their corporate credit rating increased to Investment Grade. These factors have helped AL turn its interest expense from 25% of revenue down to 21%, fueling the best profit margin in the industry (approximately 25%). AL's business model allows growth despite numerous headwinds, (Currencies, commodities, interest rates) making shares of AL an intriguing investment for…