Fortress Transportation and Infrastructure (FTAI)

We’ll start with a company structured as a REIT, a real estate investment trust, but dealing in transportation assets. Fortress buys, owns, manages, and leases a wide range of transportation assets. A large part of the company’s portfolio is held in airline assets, including 108 commercial passenger jets and 207 commercial aircraft engines. Fortress also has major stakes in three prominent rail and water energy terminals. These facilities include capabilities in rail, truck, ship, pipeline, and storage for crude oil and natural gas products.

The largest part of Fortress’s business is equipment leasing. As noted, the company owns aviation assets, both aircraft and jet engines; these are leased out to customers. The company’s second major business segment is infrastructure, which includes operations at the firm’s port and terminal properties.

In the recently ended 1Q22, Fortress reported revenues of $137.8 million, missing the forecast by ~14%, but still improving on the year-ago number by 78%. At the bottom line, the company reported a steep net loss, of $2.30 per share.

In the background to these losses, Fortress is in process of spinning off, and splitting the company into two entities, one for aviation assets and one for infrastructure. That transaction has been filed with the SEC and is expected to take effect in the next month or so; Fortress has said it will declare the next dividend before the spin-off.

That dividend requires some attention. Fortress pays out 33 cents per common share, and has held that dividend steady going back all the way to 2015. The reliability alone would make the dividend notable, but with the annualized rate of $1.32 giving a yield of 7.6%, it makes an excellent combination with the return.

Fortress shares have seen losses of 38% year-to-date. However, BTIG analyst Gregory Lewis thinks the selloff represents a “compelling entry point,” as he believes the company’s prospects are sound.

“Management noted strong demand for cargo plane resales which could allow FTAI to continue to monetize assets and re-cycle the cash. And while it has been a long and winding road the spin-off is now filed with SEC and is forecast to be completed in the next 1-2 months which will also remove FTAI’s current partnership structure (think no more K1 filings). We continue to expect the spin-off and the removal of the partnership structure to be positive catalysts for FTAI. Bigger picture, an improving backdrop for both Aviation and Infrastructure should be longer term tailwinds for both stocks,” Lewis opined.

Lewis puts a $40 price target on the shares, ahead of the spin-off, implying ~130% upside going forward – and strongly supporting his Buy rating on the shares.

Lewis is hardly the only one bullish on this stock – Fortress has 5 recent analyst reviews, and they are unanimous, for a Strong Buy consensus rating. The stock is priced at $17.34 and its $33.60 average target indicates room for ~94% in the months ahead.