TAL International Group Inc. (TAL) recently restarted its dividend as trade volumes showed improvement over the year ago period as the global recovery took hold.
Company Description
TAL International acquires and leases intermodal freight containers and chassis to customers worldwide. Its fleet consists of approximately 702,000 containers and related equipment.
It operates 18 offices in 11 countries and about 199 third party container depot facilities in 37 countries.
Fourth Quarter Showed That Recovery Was Beginning
On Feb 24, TAL International reported fourth quarter results and met the Zacks Consensus Estimate of 26 cents.
Leasing revenues fell to $72.6 million from $83.6 million in the fourth quarter of a year ago. But the numbers don’t tell all of the story.
The underlying market of global containerized trade had its worst year ever in 2009 in terms of year-to-year changes in cargo volumes. Even with the sharp drop-off in volumes starting in the fourth quarter of 2008, the company said its adjusted pretax return on equity (ROE) was over 15% in 2009.
After financial results started falling steadily in the fourth quarter of 2008 through the third quarter of 2009, these metrics recovered in the fourth quarter.
Leasing demand, which typically slows in the fourth quarter as the summer peak season fades, actually improved throughout the fourth quarter instead. Leasing is the company’s largest product line.
Its customers have also said that trade volumes have been stronger since the middle of 2009 and that they were adding container capacity back into their fleets after cutting in the first half of the year.
Additionally, core utilization increased 2.7% during the quarter to 90.3% as of the end of December.
The Dividend is Back!
TAL International discontinued its dividend in early 2009 due to the rapid decrease in trade volumes worldwide. The company is expecting much improved conditions in 2010 so it has decided to restart its dividend program.
The initial payout will be 25 cents, payable on Mar 25 to shareholders of record as of Mar 11. This is a current yield of 5.50%.
Outlook for 2010
Trade volumes continued to recover in January and February even though the first quarter is historically TAL International’s weakest quarter of the year. The major shipping lines are keeping their new container purchases to a minimum and are choosing to lease instead which is pushing up TAL’s leasing activity.
Given the leasing demand, and a core utilization rate of 92.2% through February, the company is projecting full year results to exceed 2009 by 15% to 25%.
Zacks Consensus Estimates Jump
Given TAL International’s optimism about the first two months of the year and its full year projections, analysts moved to raise estimates for the first quarter and 2010.
The first quarter Zacks Consensus rose 4 cents to 31 cents in the last 30 days.
The 2010 Zacks Consensus Estimate climbed 19.4% to $1.54 from $1.29 per share. Analysts expect 20% earnings growth in 2010.
Value Fundamentals
TAL International is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 12.1, which is well under the value cut-off of 15x. The company’s price-to-book ratio is just 1.4.
TAL International also has a solid 5-year average return on equity (ROE) of 14.1%.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
