CAI International, Inc. :CAI-US: Earnings Analysis: 2016 By the Numbers : February 16, 2017

CAI International, Inc. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of CAI International, Inc. – Aircastle Limited, Mobile Mini, Inc. and General Finance Corporation (AYR-US, MINI-US and GFN-US) that have also reported for this period.

Highlights

  • Gross margins narrowed from 59.98% to 46.88% compared to the same period last year, operating (EBITDA) margins now 58.45% from 73.03%.
  • Year-on-year change in operating cash flow of -13.67% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 294.35 249.67 227.59 212.41 173.93
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 6.11 26.84 60.27 63.93 63.47
Earnings Growth (YOY) -77.22 -55.47 -5.71 0.73 26.45
Net Margin 2.08 10.75 26.48 30.1 36.49
EPS 0.32 1.28 2.85 2.82 3.18
Return on Equity 1.33 5.94 14.05 16.78 21.31
Return on Assets 0.3 1.41 3.47 4.17 5.42

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Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 59.98% to 46.88%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 73.03% to 58.45% in this time frame. For comparison, gross margins were 59.98% and EBITDA margins were 73.03% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

CAI-US‘s change in operating cash flow of -13.67% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

CAI International, Inc. is a intermodal freight container leasing and management company. It operates through the Equipment Leasing segment. It offers a wide range of dry van containers, rail cars, and equipment including reefers, palletwides, roll trailers, and swap bodies. The company was founded by Hiromitsu Ogawa on August 3, 1989 and is headquartered in San Francisco, CA.

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