AerCap Holdings N.V. (NYSE: AER) fell after its earnings report on Tuesday. The question remains whether that should have been the case, or whether it was more tied to broader market selling pressure. AerCap seems to have exceeded all estimates and guidance was increased. Also, the stock is cheap on a valuation basis. Now Wells Fargo has opined on AerCap by adding it to the firm’s Priority Stock List.

Wells Fargo reiterated its Outperform rating and $58 to $62 valuation range. The firm also raised its 2015 EPS target to $6.25 from $5.60 and raised its 2016 EPS target to $6.50 from $6.10.

As far as why it was added to the Wells Fargo Securities Priority Stock List, several issues were given. One was valuation, and another was guidance. Another reason was a likely credit upgrade coming its way. Also a top issue is the company’s upcoming September 10 investor day.

Wells Fargo’s Gary Liebowitz and Sam Pearlstein tried to give an explanation for the negative reaction after earnings. This included AerCap’s China exposure, the absence of share buybacks in the second half, AIG’s near-term lock-up expiration for some 10.7 million AerCap shares, concerns over oil and Russia and the best one: “nit-picks.”

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The team said:

We believe these concerns obscure the bigger picture: AerCap’s position as one of the two most profitable aircraft leasing franchises with an enviable track record of portfolio growth and consistent returns – and a stock valuation that offers significant upside potential, in our view.

Key drivers for the increased outlook from the company’s own 2015 financial outlook are strong trading gains, lower leasing costs and lower general expenses.

Wells Fargo concluded that its $58 to $62 valuation range, which compares to a consensus analyst price target of $56.64 from Thomson Reuters, equates to 1.3 times the mid-2016 estimate of price-to-book and is 8.5 to 9.0 times expected 2016 earnings expectations. The risks include declines in older aircraft residual values, events that would decrease the current strong demand for travel, airline defaults and credit market disruptions. As of now, the base-case scenario seems more likely than the risk scenario.

AerCap shares were last seen down 1.6% at $46.62, against a 52-week range of $35.39 to $51.50. AerCap also trades at about 8.5 times the consensus 2015 earnings per share expectations.

AerCap is a top aircraft leasing operation. It has roughly 1,730 owned, managed or on-order aircraft in its portfolio. The company serves over 200 customers in approximately 90 countries.

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