Aercap (NYSE:AER) vs. Wabtec (NYSE:WAB) Critical Review

Aercap (NYSE:AER) and Wabtec (NYSE:WAB) are both large-cap transportation companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, valuation, institutional ownership, risk, dividends, earnings and analyst recommendations.

Analyst Ratings

This is a summary of current ratings and recommmendations for Aercap and Wabtec, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Aercap	1	1	6	0	2.63
Wabtec	0	2	5	0	2.71

Aercap presently has a consensus price target of $122.00, indicating a potential upside of 12.83%. Wabtec has a consensus price target of $221.7143, indicating a potential upside of 17.43%. Given Wabtec’s stronger consensus rating and higher possible upside, analysts clearly believe Wabtec is more favorable than Aercap.

Dividends

Aercap pays an annual dividend of $1.08 per share and has a dividend yield of 1.0%. Wabtec pays an annual dividend of $1.00 per share and has a dividend yield of 0.5%. Aercap pays out 6.7% of its earnings in the form of a dividend. Wabtec pays out 14.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Aercap has raised its dividend for 2 consecutive years and Wabtec has raised its dividend for 4 consecutive years. Aercap is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

96.4% of Aercap shares are held by institutional investors. Comparatively, 91.7% of Wabtec shares are held by institutional investors. 0.5% of Aercap shares are held by company insiders. Comparatively, 1.1% of Wabtec shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Volatility and Risk

Aercap has a beta of 1.44, indicating that its share price is 44% more volatile than the S&P 500. Comparatively, Wabtec has a beta of 1.11, indicating that its share price is 11% more volatile than the S&P 500.

Valuation & Earnings

This table compares Aercap and Wabtec”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Aercap	$8.00 billion	2.53	$2.10 billion	$16.08	6.72
Wabtec	$10.39 billion	3.11	$1.06 billion	$6.70	28.18

Aercap has higher earnings, but lower revenue than Wabtec. Aercap is trading at a lower price-to-earnings ratio than Wabtec, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Aercap and Wabtec’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Aercap	36.93%	13.13%	3.11%
Wabtec	10.92%	13.65%	7.41%

Summary

Wabtec beats Aercap on 9 of the 17 factors compared between the two stocks.

About Aercap

AerCap Holdings N.V. engages in the lease, financing, sale, and management of commercial flight equipment in China, Hong Kong, Macau, the United States, Ireland, and internationally. The company offers aircraft asset management services, such as remarketing aircraft and engines; collecting rental and maintenance rent payments, monitoring aircraft maintenance, monitoring and enforcing contract compliance, and accepting delivery and redelivery of aircraft and engines; and conducting ongoing lessee financial performance reviews. Its aircraft asset management services also include periodically inspecting the leased aircraft and engines; coordinating technical modifications to aircraft to meet new lessee requirements; conducting restructuring negotiations in connection with lease defaults; repossessing aircraft and engines; arranging and monitoring insurance coverage; registering and de-registering aircraft; arranging for aircraft and engine valuations; and providing market research services. In addition, the company provides cash management services, including treasury services, such as the financing, refinancing, hedging, and ongoing cash management of vehicles; and administrative services comprising accounting and corporate secretarial services consisting of the preparation of budgets and financial statements. Further, it offers airframe and engine parts and supply chain solutions to airlines; maintenance, repair, and overhaul service providers; and aircraft parts distributors. The company had a portfolio of owned, managed, or on order aircraft. AerCap Holdings N.V. was founded in 1995 and is headquartered in Dublin, Ireland.

About Wabtec

Westinghouse Air Brake Technologies Corporation, together with its subsidiaries, provides technology-based locomotives, equipment, systems, and services for the freight rail and passenger transit industries worldwide. It offers diesel-electric, battery, and liquid natural gas-powered locomotives; engines, electric motors, and propulsion systems; and marine and mining products. The company also offers positive train control equipment; pneumatic braking products; railway electronics; signal design and engineering services; distributed locomotive power, train cruise controls, and train remote controls; industrial/mobile Internet of Things hardware and software, edge-to-cloud, on and off-board analytics and rules, and asset performance management solutions; rail and shipper transportation management, and port visibility and optimization solutions; and network optimization solutions. In addition, it provides freight car trucks, braking equipment, and related components; air compressors and dryers; heat transfer components and systems; track and switch products; new commuter and switcher locomotives; and turbochargers. Further, the company offers freight locomotive overhauls, modernizations, and refurbishment services; locomotive and car maintenance; transit locomotive and car overhaul; unit exchange of locomotive components; and maintenance of way equipment and services. Additionally, it provides railway and freight braking equipment and related components; friction products, such as brake shoes, discs, and pads; heating, ventilation, and air conditioning equipment; access and platform screen doors; pantographs; auxiliary power converter and battery chargers; passenger information systems and closed-circuit television; signaling and railway electric relays; and doors, window assemblies, accessibility lifts, ramps, and electric charging solutions for buses. The company was founded in 1869 and is headquartered in Pittsburgh, Pennsylvania.