Exchange Income Corp T.EIF

Alternate Symbol(s): EIFZF | T.EIF.DB.J | T.EIF.DB.L | T.EIF.DB.M | T.EIF.DB.K

Industrials Airlines

Exchange Income Corporation is a Canada-based diversified acquisition-oriented company. The Company operates through two segments: Aerospace & Aviation and Manufacturing. The Aerospace & Aviation segment is comprised of three lines of business: Essential Air Services, Aerospace, and Aircraft Sales & Leasing. Its Essential Air Services includes both fixed wing and rotary wing operations. Aerospace includes its vertically integrated aerospace offerings that provide customized and integrated special mission aircraft solutions primarily to governments across the globe. Aircraft Sales & Leasing includes aftermarket aircraft, engine and parts sales and aircraft and engine leasing, along with aircraft management services. The Manufacturing segment is comprised of three lines of business: Environmental Access Solutions, Multi-Storey Window Solutions and Precision Manufacturing & Engineering. The Company also focuses on portable hydronic (glycol-based) climate-controlled equipment.

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Post by retiredcfon Oct 26, 2022 9:18am

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October 25, 2022

Exchange Income Corporation

Connecting The Dots: EIF flash read-through – RTX/GE results positive read through for R1

TSX: EIF | CAD 43.71 | Outperform | Price Target CAD 61.00

Sentiment: Positive

Our take. GE and RTX both reported Q3 results this morning. Key for investors in EIF is that the results suggest Sales and Service revenue at Regional One remains robust, and we therefore view today's announcements as a positive read through. Moreover, GE reiterated Aerospace guidance for sales up >20% (+21% YTD) suggesting solid demand will continue during the remainder of the year. However, we highlight that we expect Leasing revenue at Regional One to remain pressured in 2022 due to a pilot shortage, especially in Europe, but in line with our expectations. We point to an Investor Presentation from SkyWest in September that called for pilot shortage headwinds to persist until late 2023. EIF remains on RBC's Canadian Small Cap Conviction List, and we remain positive on the shares at today's levels, pointing to a 6.8x NTM EV/EBITDA valuation despite our expectation for low-20% EBITDA CAGR 2021 to 2024. See our Q3 preview note here.

What happened? Raytheon and GE reported Q3 results this week. See below for further details as it pertains to EIF.

RTX's Pratt & Whitney segment reported Q3 sales up +14% y/y. The increase in sales was driven by a +26% increase in commercial OE and a +23% increase in commercial aftermarket which more than offset a -2% decrease in military sales.
GE's Aerospace segment reported Q3 revenues up +24% y/y driven by substantial growth in Commercial Services from more than +30% internal shop visit growth, strong spare part sales, and favorable price. GE also expects full year Aerospace margins to be high-teens with greater than 20% top line growth.