FTAI's Best Quarter Ever, 37% Below the High: The Power Ramp Meets a Multiple Problem

Record modules, 100+ Mod-1 units under contract, a $1B buyback — against a stock down 28% in 90 days and a margin target that quietly slid from 40% to 30%.

FTAI · Earnings Call · 2026-10-29

FTAI Aviation's third quarter was the best in its history on almost every line. Aerospace Products produced $910 million of revenue (+76%), a record 311 CFM56 modules, and $282.4 million of EBITDA at a 31% margin; consolidated adjusted EBITDA reached $348.3 million, up 17% year-over-year, with net income of $149.1 million. And yet the stock walks into this print 28% lower over 90 trading days — a 42% slide across sixteen weeks, then a violent 27% snapback in the last four sessions — and 37% below its February high of $310.04. A $20 billion market cap now trades on the assumption that the second half of the story is real.

The record nobody paid for

Part of the disconnect is macro. The global tape's AI data center complex has bled badly — 49 decliners against 7 advancers over the last 30 days — and FTAI's newest leg sits squarely inside that trade. Part of it is multiple: even after the drawdown, this is still 55.9x trailing earnings and 46.4x operating income. The market is not arguing with the quarter. It is arguing with the price of the next two years.

Power: contracts replace test cells

Two genuine milestones landed. Critical testing is finished — 25 MW at peak, 23.1 MW ISO continuous, on both natural gas and liquid fuels — and more than 100 Mod-1 units are now under contract into 2028, with $234 million of customer deposits collected ahead of delivery. But watch the vocabulary rotate. For several quarters, test-cell capability was one of FTAI's most prominent themes — second-ranked in the prior quarter — and this quarter it appears on the decliner list. R&D milestones have given way to units under contracts, and the fresh language is combined cycle: a mobile add-on converting waste heat into roughly 9 MW of extra output with no incremental fuel or water, pushing efficiency above 50%, with first units testing in the second half of 2027. The genuinely new item is risk. Jereh, the packaging partner that was FTAI's second-ranked keyword two quarters ago, fell out of the top-30 entirely — and then a Barclays analyst, not management, raised the newly relevant question: a US executive order on non-Chinese-sourced on-grid power equipment. David Moreno's defense was that the order “is really aimed at bulk power and is not intended to cover behind-the-meter” — David Moreno, President · 2026-10-29, adding that packaging is not China-exclusive, with facilities in the UAE, Houston and Canada. Fair enough — but in February the same partnership was pitched in nearly opposite terms: “they have manufacturing facilities across the U.S. Canada, the UAE and in China” — David Moreno, President · 2026-04-30. The optionality always existed; what changed is that it now has to be exercised, and it entered the transcript through a question rather than the prepared remarks. Then there is the range itself. 2027 power EBITDA is guided at $450 million to $750 million, against a total of $2.3 billion, and Nicholas McAleese confirmed the number set is “clarified on the lower end for conservative purposes” — Nicholas McAleese, Chief Financial Officer · 2026-10-29. Kristine Liwag asked essentially the same thing in July and got this:

the $450 million does not assume 100 units. It's materially less than the 100 assumption.
Joseph Adams, Chief Executive Officer · 2026-07-30

Two quarters later, 100+ units are contracted and the floor has not moved. Investors are being asked to underwrite the top half on faith — which is arguably why the tape is not paying for it.

What management stopped saying about margins

Begin with the keyword: sale leaseback is now FTAI's top-ranked theme, no longer a passing reference but the engine of the model. The mechanism is elegant and macro-driven — with high oil prices squeezing airline liquidity, an airline sells aircraft, keeps flying them through SCI II, and hands the shop-visit problem to FTAI. Moreno quantified the mix shift plainly: SCI I sourced roughly 20% of aircraft via sale-leaseback; SCI II is running around 40% and rising. SCI I is fully committed at 301 aircraft, with $3.9 billion invested at quarter-end heading toward roughly $6 billion by December 31. The quieter change is the margin target. In February, Joe Adams was unambiguous: “everything we wanted to have in place to achieve that 40% margin is in place, and we are very confident that we have the capability to do that, to grow that in 2026 to 40%.” — Joseph Adams, Chief Executive Officer · 2026-02-26 By July it had become 30% for the near term. This quarter: “we think 30% margins is a good assumption for the next couple of years, and it is a nice target.” — Joe Adams, Chief Executive Officer · 2026-10-29 The 40% was never formally withdrawn — it simply stopped being said. The reported numbers explain why: 33.3%, down 12.1 points year-over-year. More dollars per engine, fewer percent. Deliberate and defensible, but a structural ceiling on the operating leverage the sell-side still models.

Cash, capital, and the December stage

Leverage is genuinely in hand at 2.2x run-rate EBITDA, below the 2.5-3.0x target, with no bond maturities before May 2028 at a 6.5% weighted average cost and roughly $2.4 billion of liquidity. The $1 billion authorization — a $500 million accelerated repurchase completing by year-end, $80 million already bought, $420 million left — is a credible signal. But the cash story deserves a second look. Management's adjusted free cash flow of $1.1 billion before growth initiatives is a very different animal from the reported line: -$130 million in the June quarter, on inventory build and $463 million of growth spend. Not alarming for a company standing up a turbine line — but the distance between the two numbers is precisely what the December 10 investor day needs to close. Finally, the business has changed shape faster than its disclosures. Strategic Capital is now more than half of Aviation Leasing EBITDA, and when asked how the Street should model that, the answer was a flywheel metaphor rather than a reporting structure. A company running SCI I and SCI II, six CFM56 overhaul facilities, and a turbine business that other reporters are converging on — ProPetro's MW units, Generac's prime power push — owes the market segmentation that reflects the whole. The operating results are extraordinary. The packaging of them is still catching up, and the stock is voting on the gap.