Image: Mobile Mini.
Portable-storage specialist Mobile Mini (MINI) has had substantial success in tapping the demand for efficient and easy-to-use storage solutions throughout its customer base. Still, with the stock at an extremely high valuation, investors have high expectations for the company, and coming into Thursday morning's second-quarter financial report, Mobile Mini shareholders wanted to see a nice rebound from last quarter's somewhat sluggish performance. Unfortunately for them, Mobile Mini's results once again fell short of their high expectations, with growth in sales and net income failing to reach the levels that those following the stock had wanted to see. Let's take a closer look at how Mobile Mini fared during the quarter and whether it can accelerate its growth in the future.
Mobile Mini can't live up to investor hype
Mobile Mini's second-quarter growth wasn't terrible, even if it didn't reach the levels investors had sought. Total revenue climbed 22% to $130.3 million, and Mobile Mini posted adjusted net income of $13 million, up 20% from the year-ago quarter. Yet shareholders had expected revenue growth of better than 25%, and adjusted earnings of $0.28 per share were far lower than the $0.34 per share consensus estimate.
A closer look at its operational metrics shows some of the challenges that Mobile Mini has faced. The company saw portable storage rental rates rise 5.1% year over year, with fleet utilization remaining relatively steady at 66.7%. But overall rental revenue in the portable storage area gained just 3.2% even excluding the mobile wood office fleet that Mobile Mini sold during the quarter, as foreign currency fluctuations cost the company more than two percentage points of revenue growth in that area.
The specialty containment area provided another nice boost for Mobile Mini's overall results. Sales from the unit acquired from Evergreen Tank Solutions came in at $27.3 million, with adjusted earnings before income tax, depreciation and amortization of $9.9 million offering Mobile Mini slightly higher margins than its portable storage business.
CEO Erik Olsson commented favorably on Mobile Mini latest quarter. "Within our North American portable storage business," Olsson said, "our recently realigned sales force and operational teams achieved the highest monthly activation in the Company's history in June." With an effort to support premium pricing and increasing efficiency in internal sales productivity, Mobile Mini is making the most of its existing customer base as well as reaching out to potential new clients.
Can Mobile Mini store up even more success?
Mobile Mini sees its opportunity to grow getting larger rather than smaller in the future. The company continues to recruit new sales representatives, and its short-term goal is to boost its internal sales force by about 10%. In Olsson's eyes, making Mobile Mini's sales personnel as effective as possible goes well with the company's premium-pricing strategy, as having people to explain why Mobile Mini's storage solutions are better than what competitors can offer is essential to getting new customers to come on board.
The specialty containment business continues to hold particular promise for Mobile Mini. Some feared that the energy bust could potentially hurt that part of the business, but so far, Mobile Mini reports that it has kept doing well in the downstream market. Despite some headwinds among upstream energy customers, Mobile Mini hopes to keep building up the specialty containment division's potential and to position itself for sharper growth when the energy industry recovers.
Given the high expectations that many have put on Mobile Mini's shoulders, some investors will inevitably be disappointed with the company's failure to match the growth rates that they wanted it to achieve. From a fundamental perspective, though, Mobile Mini is still demonstrating its ability to grow in a niche market that has considerable potential for long-term growth. As long as its growth trajectory doesn't get derailed entirely, Mobile Mini still has a lot of promise for the future.
