Textainer (TGH) is looking for industry conditions to improve throughout 2010.
Company Description
Textainer is the world’s largest lessor of intermodal containers with a total fleet of more than 1.3 million containers. The company leases containers to more than 400 shipping lines, including each of the world’s top 20 container lines.TGH is also the primary supplier of leased containers to the U.S. Military.
Improving Industry Fundamentals
Shipping consultancy firm, Drewry, expects to see container traffic grow 3% to 4% in 2010. Drewry also believes that the industry may have passed through the worst of the global recession.
Fundamentals are improving because several major container shipping lines were focused on staying in business and stabilizing their balance sheets (selling equity to pay off debt). As a result, very few containers were manufactured in 2009.
The company indicated that many shipping lines are not planning to buy new containers this year. That combined with a limited capacity for producing new containers sets the stage for higher lease rates and further improvement in the leasing industry utilization rate of 90%.
Textainer has already watched its utilization rate increase from a low of 86% in September 2009 to 91% today. This is important because every 1% improvement in utilization adds about $4.4 million in annual pre-tax income.
All told, the company believes they will be able to increase utilization and price throughout 2010. If that’s the case, then analyst estimates should continue moving higher in the quarters ahead.
Strong Fourth-Quarter Results
On February 10, TGH reported that total revenue for the fourth quarter was $67.2 million, up 3% from the fourth quarter of 2008. TGH had earnings $0.45 per share, down from $0.55 in the year-ago quarter, but $0.11 ahead of consensus estimates. For 2009, total revenue was $237.3 million, which was a decrease of 14% compared to 2008. Earnings per share were $1.69, down from $2.03 in 2008.
Estimates Moving Higher
Prior to the company’s fourth-quarter earnings release, analysts polled in the Zacks Consensus estimated that Textainer would report EPS of $0.36. After TGH’s earnings release, the Zacks Consensus moved higher by $0.06 to $0.42. In the last month, the Zacks consensus estimate for 2010 climbed from $1.60 to $1.82, while 2011 the consensus estimate went from $1.93 to $2.10.