Textainer Group Holdings (TGH 0.14%) continued its hot streak in November, soaring another 21%, pushing its year-to-date rebound up near 200%. Fueling that fierce rally is the significant improvement in the container leasing market, which enabled the company to get back into the black during the third quarter.
Textainer reported its third-quarter results last month. The company's revenue rose 4.3% versus the year-ago period to $125.6 million thanks to an improvement in lease rental income as well as gains on the sale of used containers. That helped drive the company's adjusted net income up to $18.6 million, or $0.33 per share, which reversed a string of quarterly losses and was a $27.8 million improvement from the second quarter.
That said, as much as the market liked those results, it was even more impressed with the company's outlook. First, the company pointed out that it has invested roughly $500 million in buying new containers that it signed to lucrative leases. Those additions position it for incremental growth over the next several quarters as customers take delivery. In addition, the company noted that container leases that expire over the next year are well below current market rates. CEO Phillip Brewer said, "If current market conditions continue, as these leases reprice any increase in rental revenue will flow straight to our bottom line."
While Textainer's shares are up sharply this year, they're still about 50% off their peak a few years ago. Because of that, the stock appears to have plenty of fuel left in the tank to continue running higher. While another triple-digit gain over the next year is unlikely, Textainer could continue outperforming the market, especially if it brings back its once lucrative dividend.