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Why Shares of Mobile Mini Are Dropping Today

By Timothy Green – Updated Oct 25, 2016 at 12:39PM

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A drop in revenue driven by currency and weak demand for specialty containment led the company to miss estimates across the board.

Image source: Mobile Mini.

What happened

Shares of portable storage and containment solutions provider Mobile Mini (MINI) slumped on Tuesday following the company's third-quarter report. Mobile Mini missed analyst estimates on all fronts, sending the stock down about 10.5% by 11:30 a.m. EDT.

So what

Mobile Mini reported third-quarter revenue of $128.9 million, down 3.3% year over year and about $4 million below the average analyst estimate. The decline in revenue was driven by the specialty containment business, which contracted by 7% year over year. Strength in the portable storage business, which recorded year-over-year growth of 2.4%, partially offset this weakness.

Mobile Mini reached an all-time high for units on rent as of the end of the quarter, but higher sales representative turnover knocked down productivity. The company reported adjusted earnings per share (EPS) of $0.31, down from $0.35 in the prior-year period and $0.06 lower than analysts expected. EPS came in at $0.29 on a GAAP basis, down from $0.31.

In addition to reporting its results, Mobile Mini declared a cash dividend of $0.206, payable to shareholders of record on Nov. 9. The stock yields 3.15% following Tuesday's decline.

Now what

Mobile Mini CEO Erik Olsson pointed to the strength of the portable storage business while assuring investors that the company is working to drive revenue higher:

We continue to be strongly positioned in both the portable storage and specialty containment markets. Portable storage pricing increased a solid 2.4% this quarter compared to the prior-year period, marking the fifteenth quarter in a row we have achieved year-over-year increases. To drive additional top-line growth, our immediate focus is on executing our salesforce model and providing the tools to our inside sales representatives to ensure their success.

Steady growth since 2010 has been interrupted this year for Mobile Mini, driven by weakness in its specialty containment business and currency fluctuations. The stock has now tumbled about 47% since peaking in 2014, but the company remains highly profitable, producing a GAAP operating margin in excess of 20% during the third quarter. Investors will likely need a few more quarters of data in order to determine whether its problems are more than just a bump in the road.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Mobile Mini. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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