Mobile Mini (MINI) has had to deal with plenty of adversity in the industries it serves, and that has taken its toll on the company's own business prospects. Although its storage solutions business has applications for customers throughout the economy, Mobile Mini's tank and pump division primarily serves the energy industry. 2017's decline in crude oil prices has once again hurt the companies that most need Mobile Mini's services in that arena.
Coming into Friday's second-quarter financial report, Mobile Mini investors were hopeful that the company would at least be able to produce minimal growth from year-ago levels. Revenue numbers were fairly encouraging, but a decline on the bottom line on an adjusted basis showed some of the difficulties that the company continued to face. Let's look more closely at Mobile Mini and what its latest results mean for the storage specialist.
Image source: Mobile Mini.
Mobile Mini's bottom line looks a bit less energetic
Mobile Mini's second-quarter results were mixed in most investors' eyes. Total revenue picked up almost 3% to $126.7 million, which was slightly better than the 2% growth that most of those following the stock had expected. GAAP net income more than doubled, but adjusted net income was down 7% to $10.4 million. The resulting $0.24 per share in adjusted earnings fell short of the consensus forecast among investors for $0.26 per share.
Looking more closely at Mobile Mini's results, business trends from past quarters generally continued. Outright sales of units climbed at an impressive 24% rate, but revenue from rentals was up just 1% from where they were a year ago.
Mobile Mini's segment performance also remained similar to what we've seen recently. The storage solutions business enjoyed a 3.5% rise in segment revenue, coming from a good mix of rental and sales activity despite currency-related headwinds. Activations in the segment climbed 12%, helping Mobile Mini hit an all-time high on that metric for the quarter. Average units rented climbed by between 4% and 5%, and the company was able to boost rental rates by nearly 3% compared to last year's levels. Operating income inched higher by less than 1%.
The tank and pump solutions segment didn't do as well for Mobile Mini. Revenue dropped by 1%, and a large increase in overhead costs almost wiped out operating income from the segment. Mobile Mini pointed out the sequential improvement from the first quarter, noting that increased project work helped to support tank and pump solutions during the quarter.
Operationally, Mobile Mini saw store counts fall by three, but rental fleet units moved higher slightly. Average utilization figures improved by about a percentage point for both parts of the business, building optimism for the future.
What's next for Mobile Mini?
CEO Erik Olsson was happy with the company's ability to stay strong even in tough conditions. "Our sales approach and commitment to world-class customer service continue to drive revenue growth [in storage solutions]," Olsson said, and "our outlook for Tank & Pump remains positive for the rest of 2017, although both market fluctuations and the timing of our customers' projects introduce variability into year-over-year comparisons."
Mobile Mini also remains committed to treating its shareholders well by returning capital through quarterly dividends. The company sustained its current dividend, which amounts to a 3% yield. Even though Mobile Mini's payout ratio is relatively high, income investors are still optimistic that the company can continue its streak of 10% increases in quarterly payouts when it next considers higher dividends in early 2018.
Mobile Mini shareholders took the earnings news in stride and focused on the more optimistic aspects of the report, and the stock jumped 6% in the opening minutes of morning trading following the announcement. Even though the company would like the energy industry to rebound so its tank and pump division can return to more normal levels of activity and pursue growth opportunities, Mobile Mini remains confident in its long-term approach toward boosting its entire business, and investors appear to believe that the best is yet to come for the storage specialist going forward.
