The container trade continues to be hot. CAI International, Inc. (CAP) saw nearly 100% utilization rates in the fourth quarter as demand remained high. This Zacks #1 Rank (strong buy) is trading at just 11.5x forward estimates.
CAI International knows the pulse of global trade. It manages and leases intermodal freight containers in 10 countries worldwide. The company has a fleet of 827,000 TEUs.
CAI Beat Again In the 4th Quarter
On Mar 1, CAI International reported its fourth quarter results and surprised by 30%. Earnings per share were 57 cents compared to the consensus of just 44 cents. This was an increase of 235% compared to the 17 cents earned in the fourth quarter of 2009.
It was the third consecutive earnings beat.
Revenue climbed 65% to $25.2 million from $15.3 million in the fourth quarter of 2009. Container rental jumped to $21.4 million from $12.8 million in the year ago quarter mainly because of a 63% increase in the average number of TEUs of owned containers on lease and a 13.5% increase in the average utilization.
Average utilization rose to 98% from 81.9% in the year ago quarter.
How Much Longer Will This Strong Demand Last?
With a shortage of containers in 2010, container companies were able to cash in on strong demand. CAI expanded its fleet by 48% in 2010 and deployed those on long term leases.
The company entered into a $300 million delayed draw 6-year term loan facility to fund $185 million on the closing date.
However, the company expects a slower first quarter, which is historically the slow period in the industry.
The second quarter is when most shipping companies reserve new equipment for leases. CAI expects utilization to remain high into the third quarter of 2011 when demand has historically been high.
Zacks Consensus Estimates Rise
Since the earnings report, analysts have moved to raise full year estimates.
The 2011 Zacks Consensus Estimate rose to $2.02 from $1.90 per share in the past month, but is down 3 cents in the last week.
Analysts are still bullish on 2012 with the Zacks Consensus rising to $2.57 from $2.44 in the prior month. It is also down 2 cents in the last 7 days even though no estimates have been revised lower.
Earnings are still expected to be hot, growing 40% in 2011 and another 27.4% in 2012.
Valuations Still Attractive
Shares have been on a tear during the 2-year bull market but still trade a cheap valuations.
In addition to the low P/E, CAI has a price-to-book ratio of just 2.3 which is well within the value range of under 3.0. It is also slightly below that of its peer TAL International (TAL) which trades with a P/B of 2.6.
The company also has a solid 1-year return on equity (ROE) of 16.7%, in line with TAL’s 16.1%.
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. You can follow her at twitter.com/traceyryniec.
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