Triton International Limited (TRTN) Tops Q1 EPS by 17c, Revenues Miss

Triton International Limited (NYSE: TRTN) reported Q1 EPS of $1.91, $0.17 better than the analyst estimate of $1.74. Revenue for the quarter came in at $346.74 million versus the consensus estimate of $351.09 million.

Highlights:

• Net income attributable to common shareholders for the three months ended March 31, 2021 was $129.3 million or $1.92 per diluted share.
• Adjusted net income was $128.7 million or $1.91 per diluted share, an increase of 105.4% from the first quarter of 2020 and 12.4% from the fourth quarter of 2020.
• Trade volumes and container demand were exceptionally strong in the first quarter. Utilization increased 0.4% during the quarter to reach 99.3% as of March 31, 2021. Utilization was 99.4% as of April 23, 2021.
• As of April 23, 2021, Triton has purchased $2.6 billion of new containers for delivery in 2021, most of which have already been committed to high value, long duration leases.
• Triton’s corporate credit rating was upgraded to BBB- by S&P Global Ratings on March 30, 2021.
• Triton completed an inaugural $600 million 2.05% senior secured investment grade bond offering on April 15, 2021.
• Triton’s Board of Directors announced a quarterly dividend of $0.57 per common share payable on June 24, 2021 to shareholders of record as of June 10, 2021.

"Triton achieved outstanding results in the first quarter of 2021," commented Brian M. Sondey, Chief Executive Officer of Triton. "We generated $1.91 of Adjusted earnings per share in the first quarter, an increase of more than 100% from the first quarter of 2020 and an increase of 12.4% from the fourth quarter of 2020. We also achieved an annualized Return on equity of 25.0%."

"Triton continues to benefit from very favorable market conditions. Trade volumes remain strong due to a shift in consumer spending from services and experiences to goods, and demand for containers has been boosted further by a variety of logistical challenges that have slowed the global movement of containers. Our utilization increased to 99.3% as of March 31, 2021 and currently stands at 99.4%. The strong demand for containers has also led to high new container prices and market lease rates. Container factories are currently quoting over $3,500 for a new 20’ dry container, and market lease rates for new containers are significantly higher than the average lease rates in our lease portfolio. Our average selling price for used dry containers jumped further in the first quarter, leading to an increase in our disposal gains from the fourth quarter of 2020 despite a significant decrease in disposal volumes."

"Triton is investing heavily in new containers to help our customers manage the strong increase in trade volumes. Our customers generally did not anticipate the rapid growth in trade that began in the second half of 2020, and all major shipping lines have needed to add significant numbers of containers. Shipping lines have been primarily relying on the leasing market to fulfill their container requirements, and Triton has secured a meaningful share of leasing transactions due to our industry-leading supply capability and our strong reputation for reliability. Triton has purchased approximately $2.6 billion of containers for delivery in 2021, with $0.7 billion accepted in the first quarter, and we have already pre-committed most of our purchased containers to high-value, long-duration leases. We estimate that our existing orders would translate to asset growth of close to 20% for Triton in 2021."

"Triton is highly focused on locking-in durable improvements to our business, profitability and cash flow. The average lease duration for our 2021 new dry container lease commitments is over 12 years, and we estimate that approximately 75% of the used containers we have supplied since last July have been leased on life-cycle leases, which keep the containers on-hire until our typical disposal age. The large block of attractively priced new leases and improved off-hire protections for our used containers will provide a strong foundation to our profitability and cash flow for years to come."

"Our balance sheet remains in great shape. Our leverage remains well below our typical historical range, and our profitability supports our high current growth rate with little impact on our leverage. In March 2021, our corporate credit rating was upgraded to BBB- by S&P, reflecting our strong market and financial position. In the first quarter, we issued $1.2 billion of ABS notes and in April 2021, we successfully completed an inaugural issuance of $600 million investment grade senior secured notes. These successful transactions, which further reduce our overall average borrowing costs, provide an attractive source of financing to support our customers and will contribute to the strong return on our 2021 container investment."

Outlook

Mr. Sondey continued, "Looking ahead, we have significant operational and financial momentum, and we expect to achieve outstanding profitability throughout 2021. Trade volumes remain strong, our container fleet is close to maximum utilization, and we have approximately 500,000 TEU of new containers pre-booked for pick-up in the second and third quarters. We anticipate some normalization of consumer spending patterns as COVID vaccination rates grow, but economists are generally projecting a strong bounce to global GDP in the second half of 2021, and we typically experience peak dry container demand in the third quarter as retailers stock up for the holiday season. We expect our Adjusted net income per share to hold fairly steady from the first to the second quarter of 2021. We expect our leasing margin will increase substantially due to a high volume of new container pick-ups, though we expect this to be mostly offset by lower disposal gains due to a very low volume of container off-hires and disposals. Overall, we expect our profitability, Return on equity and cash flow to remain at very high levels."

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

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