One thing is certain from the recent third quarter results of TAL International Group Inc. (TAL), the global shipping container company: the global economic recovery continues full steam ahead. Utilization rates for its containers were at a record high 98.1% in the quarter.
TAL International is at the forefront of the global economy because it acquires and leases intermodal freight containers and chassis to customers around the world. If shipping is picking up, the company will see it.
Its fleet consists of approximately 807,000 containers and related equipment. It operates 18 offices in 11 countries and about 193 third party container depot facilities in 37 countries.
Lots of Demand But Little Supply
There has been a shortage of shipping containers since the recovery began. As a result, TAL has invested $875 million in 2010 on new equipment, among its highest investment ever. This includes 300,000 TEU of new dry containers and 25,000 TEU of refrigerated containers.
Still, utilization rates averaged 98.1% in the third quarter, an all-time high, and hit as high as 98.6% on Oct 27, when it reported the third quarter results. Basically, every container the company has is being leased.
Revenue grew 15.5% from the third quarter of 2009 and also 13.5% from the second quarter of 2010.
Earnings per share easily surprised on the Zacks Consensus Estimate by 17.7%. EPS came in at 60 cents versus the 51 cent consensus. It was TAL’s third earnings surprise in a row.
Good Times to Last Into 2011
TAL is still predicting favorable conditions for the industry through the first quarter of 2011. It expects strong sequential growth in leasing revenue to continue as well as high utilization rates and elevated used container sale prices.
The company did not give actual EPS guidance but the analysts have been busy raising estimates since the announcement.
The 2010 Zacks Consensus Estimate has risen 11 cents to $1.94 per share in the last week with 3 estimates out of 6 total estimates in that time.
It’s a similar story for 2011, as 2 estimates have moved higher in the last month pushing the 2011 consensus up to $2.37 from $2.28 per share.
Earnings are expected to rise 22.5% in 2011.
Juicy Dividend Continued in the Third Quarter
TAL has been paying a quarterly dividend recently as its fortunes have improved. It announced on Oct 27 that it was raising it for the second time this year to 40 cents from 35 cents.
This is currently a very attractive yield of 5.7%.
Going forward, the company is looking to evaluate its dividend only an annual basis, instead of quarterly. But, for now, it remains a quarterly evaluation.
Is There Any Value?
TAL International has several value characteristics. It is trading with a forward P/E of 14.5, which is in-line with its peers and just under the average of 14.7 for the S&P 500. This is considered within the “value” range, which is under 15x.
Its price-to-book ratio is also within the value parameters at 2.1.
The company also has a solid 1-year return on equity (ROE) of 12.4% which beats its peers averaging just 8.2%.
TAL International is a Zacks #1 Rank (strong buy) stock.
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