Textainer Estimates Cut Again

Textainer Group Holdings Limited (TGH) posted 4th quarter net earnings before nonrecurring items of $26.2 million, or $0.55 per diluted share, up 40% from $18.4 million, or $0.39 per diluted share, in the year-ago quarter. This was above the $0.47 consensus and our estimate of $0.45, solely due to an unexpected reduction in the effective tax rate to a 16% tax credit from a 9% tax rate last year.

Total revenues for the quarter fell 7% to $65.6 million, largely due to an $8.8 million, or 72%, decline in trading container sales proceeds on a drop in the number of trading containers available for sale.

We are again slicing our 2009 diluted EPS estimate -- this time to $1.35 from $1.70, as we expect revenues to decline further as utilization rates fall and container sales drop, which will more than offset benefits from lower depreciation on a change in residual assumptions.

While the $0.92 annual dividend is generous and provides a 21.0% current yield, we cannot rule out a cut in the face of a protracted economic downturn.

We are maintaining our Hold recommendation on TGH. The current Zacks rank is 4, indicating near-term selling pressure on the stock. In afternoon trading, TGH share are up almost 3% from Friday’s closing price of $4.38.

Read the full analyst report on TGH