Triton International Limited (TRTN) Misses Q1 EPS by 1c, Revenues Miss

Triton International Limited (NYSE: TRTN) reported Q1 EPS of $0.93, $0.01 worse than the analyst estimate of $0.94. Revenue for the quarter came in at $321.5 million versus the consensus estimate of $323.83 million.

Highlights:

• Net income attributable to common shareholders was $67.2 million or $0.94 per diluted share.
• Adjusted net income was $67.1 million or $0.93 per diluted share, a decrease of 21.8% per diluted share from the first quarter of 2019.
• Utilization averaged 95.4% in the first quarter of 2020.
• Triton raised $150.0 million from the issuance of Series D perpetual preference shares on January 24, 2020. The Series D shares have a dividend rate of 6.875%. During 2019 and 2020, Triton has raised $555.0 million through issuance of perpetual preferred shares with an average dividend rate of 7.58%.
• Triton repurchased 1.4 million common shares during the first quarter, and has repurchased an additional 0.7 million common shares through April 17, 2020. Triton has purchased over 10.8 million common shares since the inception of the program in August 2018.
• Triton's Board of Directors increased the share repurchase authorization to $200.0 million.
• Triton's Board of Directors announced a quarterly dividend of $0.52 per common share payable on June 25, 2020 to shareholders of record as of June 11, 2020.

Operating Performance

"Triton achieved solid results in the first quarter of 2020 despite facing significant market disruptions from the COVID-19 outbreak," commented Brian M. Sondey, Chief Executive Officer of Triton. "We generated $67.1 million of Adjusted net income in the first quarter, or $0.93 of Adjusted net income per share, and we realized an annualized Return on equity of 13.1%. Our first quarter results include a $3.9 million credit charge related to one of our mid-sized customers."

"Starting late January, the outbreak of COVID-19 and the implementation of extensive work restrictions in China led to a steep drop in exports from China. This drop in exports led to limited container demand, and our utilization has been decreasing since February after stabilizing in December and January. However, first quarter container production was very low, and our high-quality long-term lease portfolio continues to provide strong protection against short-term market challenges. As a result, container drop-off volumes have been moderate and our utilization was 95.2% as of April 17, 2020. New container prices increased rapidly in the first part of the year due to early expectations for increased trade growth and actions by container manufacturers to rationalize shift capacity. While container prices have moderated recently, price indications remain over $2,000 for a 20\' dry container."

"As of April 17, 2020, we have purchased $192.8 million of containers for delivery in 2020. While new container purchases remain below our target level, Triton continues to use its strong cash flow to drive shareholder value in other ways. Our regular dividend currently provides an annual yield over seven percent. We also repurchased 1.4 million common shares during the first quarter for an average price of $27.43, and repurchased an additional 0.7 million shares through April 17, 2020. We have purchased over 10.8 million shares since the inception of the program in August 2018."

"Export volumes from China increased throughout March as work restrictions eased in China. However, the spread of COVID-19 to other parts of the world and the strong actions taken by many countries to reduce exposures have led to a sharp decrease in global economic activity during the second quarter and a second steep drop in containerized trade volumes. We expect demand for leased containers to be negatively impacted for as long as global economic activity and trade volumes are weak. A prolonged slowdown in trade volumes due to the pandemic could significantly increase the financial challenges facing our customers. We are closely monitoring our customers’ payment performance and expect our customer credit risk will remain elevated as long as economic and trade disruptions persist."

"We believe Triton is well positioned to manage through the current environment and fully participate in the eventual market recovery. Our lease portfolio provides a high degree of revenue and cash flow stability. Our operations are well-suited to remote working and we have not experienced problems supporting our customers. Our leverage is well below our typical level due to the series of perpetual preferred stock offerings we completed over the last year. We have a significant level of cash on hand and extensive availability under our revolving credit facilities. We have a large inventory of new and used containers in key demand areas, and stand ready to support our customers with our unrivaled supply capability when demand recovers."

Outlook

"There is a high degree of uncertainty to our outlook due to the unprecedented nature of the broad economic shutdowns across the globe. We expect our profitability will decrease from the first quarter of 2020 to the second quarter due to weak economic and trade activity. The trajectory of our profitability from the second quarter through the end of the year will depend on how rapidly the global economy and trade volumes recover from COVID-19 shocks, and whether we experience a meaningful level of credit losses.

In the past, we have typically benefitted from strong recoveries after periods of weak market conditions. In this case, the eventual recovery in lease demand could be magnified by operational disruptions from COVID-19 shutdowns and the widespread use of containers as temporary storage for cargo. These disruptions have slowed the global flow of containers and may increase the number of containers needed when cargo volumes recover."

For earnings history and earnings-related data on Triton International Limited (TRTN) click here.

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