The rental and leasing industry has witnessed significant growth in aircraft, transportation, computers, and software sectors. According to Statista, revenue in rental and leasing activities in the United States is projected to amount to $128.55 billion in 2022 and is expected to grow at a CAGR of 4.3% over 2022-2025.
With companies rearranging their operations and recovering from the COVID-induced disruptions, demand for rental and leasing services is expected to increase in the coming months. Although digital brands gained traction during the pandemic, they are likely to build their physical presence, while DTC brands focus on expanding their store count, leading to the demand for rental and leasing services. Moreover, the growing number of start-ups is also expected to benefit the rental and leasing industry considerably.
Given this backdrop, rental and leasing services stocks Triton International Limited (TRTN), McGrath RentCorp (MGRC), Textainer Group Holdings Limited (TGH), which all yield more than 2%, could be ideal investments now amid the heightened market volatility. These stocks have outperformed the benchmark S&P 500 index’s 4.95% decline year-to-date.
Triton International Limited (TRTN)
TRTN engages in acquiring, leasing, re-leasing, and selling various intermodal containers and chassis to shipping lines, freight forwarding companies, and manufacturers. It operates in two segments: Equipment Leasing; and Equipment Trading.
In January 2022, TRTN announced that its subsidiaries, Triton Container International Limited and TAL International Container Corporation, as co-issuers, priced a public offering of $600 million aggregate principal amount of 3.250% Senior Notes due 2032. TRTN intends to use the net proceeds from the offering to repay borrowings under the company’s revolving credit facility.
TRTN’s $2.60 annual dividend yields 3.72% at its current share price. On February 15, TRTN declared a $0.65 per share quarterly dividend, which was payable on March 25. Its dividend payouts have increased at a CAGR of 16.1% over the past three years and 22.1% over the past five years.
TRTN’s total leasing revenue increased 23.7% year-over-year to $417.2 million in the fiscal fourth quarter ended December 31, 2021. Non-GAAP net income for the quarter came in at $177.50 million, reflecting an increase of 54.8% year-over-year, while the non-GAAP net income per share stood at $2.67, up 9.9% year-over-year.
The consensus EPS estimate of $2.64 for the fiscal first quarter ending March 2022 represents a 38% improvement year-over-year. The consensus revenue estimate of $419.02 million for the same quarter represents a 20.9% increase from the same period last year. It has an impressive earnings surprise history, as it topped Street EPS estimates in each of the trailing four quarters.
TRTN’s shares have gained 25.4% over the past year to close the last trading session at $69.86. The stock has gained 16% year-to-date.
TRTN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TRTN also has a B grade in Quality and Sentiment. It is ranked #12 of 48 stocks in the B-rated Shipping industry.
Beyond what is stated above, we’ve also rated TRTN for Momentum, Stability, Value, and Growth. Get all the TRTN ratings here.
McGrath RentCorp (MGRC)
MGRC is a B2B rental company that operates through four segments Mobile Modular; TRS-RenTelco; Adler Tanks; and Enviroplex, in the United States and internationally.
On January 5, 2022, MGRC announced that it had acquired the assets of Titan Storage Containers, a provider of portable storage solutions in Texas. This acquisition is expected to expand the company’s operational capacity in the Texas market and expand its customer base.
The company’s $1.82 annual dividend yields 2.14% at its current share price. On February 23, MGRC announced a quarterly dividend of $0.455 per share for the quarter ending March 2022, payable to shareholders on April 29, 2022. Its dividend payouts have increased at a CAGR of 8.6% over the past three years and 11.3% over the past five years. It has a record of 19 consecutive years of dividend growth.
MGRC’s total revenues increased 18.1% year-over-year to $175.91 million in the fiscal fourth quarter ended December 31, 2021. Its gross profit improved 16.4% year-over-year to $82.27 million over the period, while its income from operations increased 4.7% from its year-ago value to $42.97 million. Its net cash provided by operating activities stood at $195.74 million, up 8.4% year-over-year for the fiscal year ended December 31.
Analysts expect MGRC’s revenue for the fiscal first quarter ending March 2022 to come in at $146.41 million, indicating an increase of 20.8% year-over-year. The company’s EPS is expected to grow 1.4% year-over-year to $0.72 in the same period.
The stock has gained 5.9% year-to-date to close yesterday’s trading session at $85.02. Over the past six months, it gained 18.2%
It is no surprise that MGRC has an overall rating of B, equating to Buy in our POWR Ratings system.
MGRC has an A grade in Sentiment and a B in Quality. Out of the 88 stocks in the B-rated Industrial – Services industry, MGRC is ranked #27.
In addition to the POWR Rating grades I’ve just highlighted, you can see MGRC’s growth, Momentum, Stability, and value ratings here.
Textainer Group Holdings Limited (TGH)
TGH purchases, owns, manages, leases, and disposes of a fleet of intermodal containers worldwide. It operates through three segments: Container Ownership; Container Management; and Container Resale.
TGH’s annual dividend yields 2.59% at its current share price. On February 10, TGH announced a dividend of $0.25 per common share, which was payable on March 15.
For the fiscal fourth quarter ended December 31, 2021, TGH’s income from operations increased 58.7% year-over-year to $113.99 million. Its adjusted net income grew 78% from the year-ago value to $73.23 million, while the adjusted EBITDA for the quarter stood at $182.15 million, reflecting a 33.1% increase year-over-year. The company’s adjusted net income per share was $1.46, up 80.2% from the prior-year quarter.
TGH’s revenue for the current quarter is expected to come in at $207.10 million, indicating a 21.6% year-over-year growth. The company’s EPS is expected to increase 18.5% year-over-year to $1.40 for the same quarter. TGH also beat the consensus EPS estimates in each of the trailing four quarters.
TGH has gained 8% year-to-date and 10.5% over the past six months to close the last trading session at $38.57.
TGH’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our POWR Ratings system.
The company also had a B grade in Sentiment. The stock is ranked #23 in the Shipping industry.
To get TGH’s ratings for Growth, Quality, Value, Momentum, and Stability, click here.
TRTN shares were trading at $70.18 per share on Thursday afternoon, up $0.32 (+0.46%). Year-to-date, TRTN has gained 17.69%, versus a -4.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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