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The party hasn't stopped yet for the container companies. Textainer Group Holdings Limited (TGH - Snapshot Report) had near record utilization rates, again, in the third quarter and also raised its dividend for the 7th consecutive quarter. This Zacks #1 Rank (strong buy) is still cheap, with a forward P/E of just 8.7.
Textainer 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.
Textainer Beat By 16.5% in the Third Quarter
On Nov 4, Textainer reported its third quarter results and surprised on the Zacks Consensus Estimate by 14 cents. Earnings per share were 99 cents compared to the consensus of 85 cents.
Revenue rose 45% to $109.5 million as utilization rates jumped to 98.6% from 98% in the third quarter of last year. 78% of the company's fleet is also committed to long-term and direct financing leases which provides some certainty.
Historically high sales prices for older containers being retired from marine service also boosted the quarter.
Raised the Dividend Again
Textainer has been rewarding shareholders for nearly 2 years as it has increased its dividend payout each of the last 7 quarters.
In the third quarter, it raised it by 6.1% to 35 cents from 33 cents the prior quarter. It is payable on Nov 28 to shareholders of record as of Nov 14.
It is currently yielding a juicy 4.7%.
Can This Level of Demand Continue?
Investors have nervously contemplated what happens when the demand for containers slows. Textainer acknowledges that 2011 will be a record year.
Capital expenditures for new standard dry-freight and refrigerated containers is the highest in its history. In-fleet container utilization rates continues at or near historic highs.
However, demand for new standard dry-freight containers began to slow in the second quarter.
High in-fleet utilization is expected to continue through the end of the year.
Resale prices, though, appear to have peaked and have begun to decline in some locations. However, those prices are still high by a 10-year historic standard.
Zacks Consensus Estimates Rise
The analysts continue to be bullish on Textainer. 3 out of 7 estimates rose in the last week for 2011.
The 2011 Zacks Consensus jumped to $3.33 from $3.24. That is earnings growth of 33.3%.
While estimates are also rising for 2012, the growth is expected to moderate to just 5.4%. The 2012 Zacks Consensus Estimate has climbed to $3.51 from $3.42 in the prior 7 days as well.
Valuations Still Cheap
Textainer shares had been on a fabulous 2-year rally before selling off in the summer. They are since on the move again.
However, valuations still look cheap.
In addition to a P/E under 10, the company has a price-to-book ratio of just 2.2. That is under the 3.0 level I use as a cut-off for value stocks.
Additionally, the company also has an outstanding 1-year return on equity of 24.1%.
While we know that the rest of 2011 is going to be stellar, 2012 is still looming as a wildcard. Textainer is a value stock which also pays a healthy dividend to hold investors over into next year.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at traceyryniec.