TAL International Group
) is our most recent addition to the Growth and Income portfolio.
Growth and Income Stock
Investors searching for growth and income should like what TAL has to offer. Analysts estimate that the company will grow its earnings per share 20.0% in 2010 and 17.3% in 2011. In the next 3-5 years, analysts estimate that TAL will grow its EPS 12.5% annually.
The Zacks #1 Rank stock also provides shareholders with steady cash flow from its fat dividend yield of 5.0%
TAL has two operating segments: Equipment Leasing and Equipment Trading. Equipment Leasing acquires, leases, and sells intermodal transportation equipment. Equipment Trading segment purchases containers from shipping line customers and resells these containers. As of December 31, 2009, it had a fleet of 701,946 containers and chassis, including 31,137 containers under management for third parties, representing 1,139,523 twenty-foot equivalent units (TEU).
On February 24, the reported leasing revenues for the fourth quarter of 2009 were $72.6 million compared to $83.6 million in the fourth quarter of 2008. TAL earned $0.26 per share, matching the Zacks Consensus Estimate.
The company indicated that "demand for dry containers, our largest product line, typically slows in the fourth quarter as the summer peak season fades, but leasing demand improved throughout the fourth quarter of 2009. Our customers have indicated that trade volumes have been stronger than expected since the middle of 2009, and many needed to add container capacity back into their fleets after aggressively returning containers in the first half of the year. Leasing demand in the fourth quarter was also supported by an almost total lack of new dry container production in 2009."
Outlook for 2010
The company expects leasing demand and trade volumes to improve. For the first quarter, TAL believes its improved utilization will lead to a 10%-20% increase in its adjusted pretax income. For 2010, the company expects growth of 15%-25%.
Estimates Trending Higher
After TAL reported fourth-quarter results, analysts boosted their estimates for the next two years.
The Zacks Consensus Estimate for 2010 increased 27 cents, or 21.3%, to $1.54, and the 2011 Zacks Consensus Estimate rose 25 cents, or 16.1%, to $1.80. Those estimates have held steady for the last month.
TAL's return on equity of 10.0% is above the industry average of 7.8%. The company's net profit margin of 20.3% soars past the industry average of 4.9%. TAL also has a leaner balance sheet than its peers with a debt/equity ratio of 2.8% compared to the industry's 58.0%.