Aggressive Growth: CAI International (CAP)

CAI International (CAP) is doubling its investment for this year to meet growing demand. Additionally, the company recently posted its sixth earnings surprise in the past 7 quarters.

Company Description

CAI International manages and leases intermodal freight containers on a global scale. These types of containers are used to move cargo via ship, rail or truck.

Net Income Up 63%

On Aug 3 reported quarterly results that showed container rental revenue up more than 13% sequentially. Average utilization was up almost 900 bps to 95.1%.

CAI reported net income of $5.7 million, up 73% since the same period last year. Earnings broke down 31 cents per share, beating the Zacks Consensus Estimate by 7 cents. CAI has surprised in 6 of the past 7 quarters.

Positive Outlook

Management maintains its optimistic view, expecting strong demand. CAI expects to invest $200 million in new containers, twice as much as previously forecast.

The results and outlook were enough for analysts to raised full-year estimates for this year 12 cents, to $1.16 on average. Projections for next year are up 13 cents to $1.65.

If CAI meets these expectations, year-over-year growth with be at 47% this year and another 42% next year.

Valuations

Shares of CAP are trading with attractive valuations. The forward P/E is about 12 times earnings and the PEG ratio is coming in at 1.1.

CAI International is operating much more efficiently than its peers. The company has a net profit margin of nearly 5 times the industry average, 23.6% compared to 5.1%. CAI’s ROE is 12.1%, well above the 7.4% its peers average.

The Chart

CAP immediately jumped to pressure the 52-week high, but market weakness as of late sapped the momentum. It may take some cooperation from the market, but if shares can take out that high there will be plenty of upside.

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