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Here's Why Hold Strategy is Apt for Triton International (TRTN)

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Triton International Limited (TRTN - Free Report) is benefiting from gradual increase in trade volumes and container demand. Despite adversities, the company has been committed to rewarding its shareholders.

Let’s delve deeper.

While coronavirus continues to hurt volumes, the company has been seeing gradual increase in trade volumes and container demand as economic activities pick up. The company has witnessed a strong rebound in business in the third quarter of 2020 with earnings surging 32.6% on a sequential basis. Moreover, quarter-ending utilization improved 260 basis points to 97.4%. This increase in utilization reduced direct operating expenses by $3.6 million in the third quarter.
 
With improving market conditions, Triton International’s projections for the fourth quarter of 2020 hold promise. The company estimates adjusted earnings per share to increase 25% in the fourth quarter from the third. It anticipates the current quarter to benefit from revenues on the large number of containers picked up in the third quarter. It also expects reduced interest expenses to aid performance. Further, benefits of improved utilization in the third quarter are expected to get reflected in fourth-quarter results. Triton International expects to continue reaping benefits from reduced interest expenses in 2021 and beyond.

Amid challenges, sequential decrease in Triton International’s debt is encouraging. At the end of the third quarter, debt, net of unamortized costs, decreased to $6.43 billion from $6.57 billion at the end of the second quarter.

On a further positive note, Triton International’s commitment to reward shareholders through dividend payments and share buybacks despite coronavirus-related adversities is noteworthy. Since the launch of its existing share buyback program in August 2018, the company has bought back more than 12.5 million shares. The company also has a track record of consistent dividend payments. In October, Triton International’s board announced an approximate 10% hike in its quarterly dividend to 57 cents per share (annually: $2.28).

Owing to these tailwinds, shares of the company have rallied 61.5% in the last six months, outperforming the industry’s 44.2% increase.


 

In light of the abovementioned positives, we believe investors should hold onto the Triton International stock for now, as is suggested by its Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the broader Transportation sector are FedEx Corporation (FDX - Free Report) , United Parcel Service, Inc. (UPS - Free Report) and GATX Corporation (GATX - Free Report) . While FedEx sports a Zacks Rank #1 (Strong Buy), UPS and GATX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of FedEx, UPS and GATX have gained more than 98%, 56% and 39% in the last six months respectively.

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