Triton International Limited (TRTN) Misses Q4 EPS by 3c, Revenues Miss

Triton International Limited (NYSE: TRTN) reported Q4 EPS of $1.07, $0.03 worse than the analyst estimate of $1.10. Revenue for the quarter came in at $331.2 million versus the consensus estimate of $334.07 million.

Highlights

• Net income attributable to common shareholders was $77.2 million in the fourth quarter of 2019, or $1.07 per diluted share.
• Adjusted net income was $77.5 million in the fourth quarter of 2019, or $1.07 per diluted share, a decrease of 14.4% per diluted share from the fourth quarter of 2018.
• Net income attributable to shareholders was $339.0 million for the full year of 2019, or $4.54 per diluted share.
• Adjusted net income was $341.7 million for the full year of 2019, or $4.57 per diluted share, an increase of 1.1% per diluted share from 2018.
• Utilization averaged 95.8% for the fourth quarter of 2019 and averaged 96.9% for the full year 2019.
• Triton repurchased 0.3 million common shares during the fourth quarter of 2019. Triton purchased 6.9 million common shares during the full year of 2019 and approximately 8.9 million shares have been repurchased since the inception of the program in August 2018.

Operating Performance

"Triton continued to generate solid results in the fourth quarter of 2019," commented Brian M. Sondey, Chairman and Chief Executive Officer of Triton. "We generated $77.5 million of Adjusted net income in the fourth quarter, or $1.07 per share, and we achieved an annualized return on equity of 14.6%. For the full year of 2019, we generated Adjusted net income of $341.7 million, or $4.57 per share, and achieved a return on equity of 16.0%."

"Triton achieved solid performance in 2019 despite facing increasingly challenging market conditions. Containerized trade growth was weaker than expected in 2019, reflecting soft global economic conditions and disruptions caused by the trade dispute between the United States and China. Low trade growth led to limited demand for new containers, lower prices for new containers and a reduction in market leasing rates. However, container supply remained generally well balanced due to reduced new container production, and our strong lease portfolio and unique operating capabilities helped us further mitigate the impacts of the challenging conditions. Our key operating metrics such as utilization, average lease rates and average used container sale prices held up well during the year, decreasing gradually, but remaining at generally high levels and supporting solid financial performance."

"Our investment in new containers was limited in 2019. We invested $242.5 million in new containers for delivery in 2019, well below our replacement level, leading to a 5.8% decrease in the net book value of revenue earning assets. However, we were able to redirect our strong cash flow to other high return investments. We repurchased 6.9 million shares of our common stock, representing 8.8% of the amount outstanding at the beginning of the year, and we repurchased all the third-party investor interests in a portfolio of our containers for values we believe are compelling. We also paid $2.08 per share in common dividends."

Outlook

Mr. Sondey continued, "The first quarter typically represents our weakest quarter of the year since it represents the depth of the slow season for dry containers, has the fewest number of days and is impacted by extra SG&A expenses. The first quarter of 2020 will also be negatively impacted by the decrease in our operating metrics during the fourth quarter of 2019, reduced lease rates relating to a lease extension transaction with a large customer, and extra costs of preferred dividends as we took advantage of attractive capital market conditions to issue preferred shares ahead of opportunities to deploy the additional equity capital. As a result, we expect our Adjusted net income per share will decrease from the fourth quarter of 2019 to the first quarter of 2020.”

"During December and January we started to see signs that market conditions were improving. Our customers have been hopeful that trade volumes will benefit from the agreement to ease the U.S. / China trade dispute, and we experienced more balanced pick-up and drop-off activity and a stabilization to our utilization. New container prices also increased in response to expectations for better trade growth and efforts by container manufacturers to better align shift capacity with lower production volumes, causing new 20' dry container prices to increase into the range of $2,000. It is too early to tell whether these positive trends will continue, but we remain very well positioned to take advantage of any improvement in supply / demand dynamics, especially as we move toward the traditional summer peak season."

"Like many others, we are paying close attention to developments relating to the novel coronavirus. First and foremost, we are focused on the health and safety of our employees. Despite the challenges presented by the current situation, we remain fully operational. At the same time, we expect the current slowdown in shipping activity in Asia to extend for at least the next month. Beyond then, the impact of the coronavirus outbreak on our business is unclear. Previous trade disruptions have had a mix of positive and negative impacts on container supply and demand. The balance of these effects will likely be driven by how long the disruptions last and whether economic disruptions spread to other countries."

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

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