Textainer Group Holdings Ltd. – Growth; Income |
Textainer Group Holdings Limited (TGH) saw 52% earnings growth in 2010 as demand for containers outpaced supply. Double digit earnings growth is expected again in 2011.
This Zacks #2 Rank (buy) is the largest lessor of intermodal containers in the world based on fleet size. It leases dry freight, refrigerated and specialized containers to more than 400 shipping lines.
The company also sells used containers to more than 1,000 customers around the world.
Expansion of Its Fleet
On May 16, Textainer announced it had purchased about 171,000 TEU of containers and related lease rights that it had already been managing for Buss Global Container Fonds 1 Partnership since 2006.
The majority of the containers are dry freight and will increase the dry freight percentage of Textainer's own fleet to 59% from 52% of its total fleet.
It closed for a price of $174 million.
Revenue Jumped 31% in the First Quarter
On May 5, Textainer reported its first quarter results and saw revenue rise to $91.2 million from $69.6 million in the first quarter of 2010.
It expanded its fleet in the first quarter with the acquisition of 98,400 TEU of new containers. This expansion, along with high utilization rates, contributed to the revenue increase.
The company actually missed on the Zacks Consensus by a penny. Earnings per share were 71 cents compared to the consensus of 72 cents. It was the first earnings miss in the last 4 quarters however.
The utilization rate remained high, at 98.2%, in the first quarter. The company expects it to remain in the mid to high 90s range for the remainder of 2011.
76.4% of its fleet is also supported by long-term and direct financing leases, which lock in the revenue stream.
Dividend Increased Again
In the first quarter, Textainer continued with its tradition of paying constant or higher dividends every quarter since it went public in Oct 2007.
The Board raised the dividend 6.9%, or 2 cents, to 31 cents per share over the prior quarter.
This is currently a dividend yield of about 4%, which is much higher than its industry which pays out, on average, zero.
Additionally, its five year average dividend yield is a healthy 5.7%.
Double Digit Earnings Growth
After growing earnings 52% in 2010, analysts believe that there is more to come in 2011.
The 2011 Zacks Consensus Estimate has risen to $3.17 from $3.10 per share in the last 60 days. This is earnings growth of 27%.
Shares Have Attractive Valuations Shares had been on a tear over the last 2 years, but a recent pullback has created an opportunity.
Textainer is trading with a forward P/E of just 9, which is well below the S&P 500 average of 13.6 and would be considered a "value" stock.
With the expected double digit earnings growth, the company has a PEG ratio of just 0.8, which also indicates value.
Textainer rewards investors not only with a juicy dividend of 4% but also growth AND value. That's a strong combination.
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