Mobile Mini (MINI) is best known for helping homeowners and apartment dwellers store their things, with their portable containers showing up on the lawns of many homes and college dorms this time of year. Yet Mobile Mini also serves the commercial sector, offering a wide range of storage solutions for businesses along with tank and pump products that energy-industry customers use extensively. The tank and pump business exposes Mobile Mini to the ups and downs of the oil and gas market, and that's created some challenges for the storage company in recent years.
Coming into Friday's first-quarter financial report, Mobile Mini investors had hoped to see further signs of a rebound, led in large part by the energy segment. The storage specialist was able to deliver solid revenue and profit growth, and although some investors weren't satisfied with Mobile Mini's performance in the short run, the company's long-term prospects still look good.
Image source: Mobile Mini.
Mobile Mini starts 2018 strong
Mobile Mini's first-quarter results marked a good start to the year. Revenue was up almost 14% to $140.7 million, which was quite a bit higher than the roughly 8% growth rate that most of those following the stock were expecting. Adjusted net income soared 37% to $14.9 million, although the resulting adjusted earnings of $0.33 per share missed the consensus forecast among investors by $0.01.
As we saw last quarter, the biggest contributor to Mobile Mini's growth came from the tank and pump solutions segment. The company said that revenue from the tank and pump business jumped nearly 22% from year-ago levels, and the division reversed a loss in the year-earlier period to post modest levels of operating income. After making adjustments for one-time items, adjusted pre-tax operating earnings were higher by more than 40%.
The primary storage solutions business also fared well. Revenue climbed 12%, and the segment's bottom line was higher by roughly the same amount on an adjusted basis. Rental revenue from the business was up even more strongly, helping to outweigh slight declines in equipment sales during the period.
Looking at key internal metrics, Mobile Mini had a lot of good news. Utilization in the tank and pump division soared more than 11 percentage points to 73.6%, reflecting greater demand from the energy industry in light of rebounding crude oil prices. Average units rented in the storage solutions business rose by 5%, helping to bring average storage fleet utilization to 70.6% for the period. Mobile Mini continued to use its pricing power to raise rental rates by 3% year over year. Favorable currency moves also helped the company's financials modestly, contributing about 2 percentage points of revenue growth to the storage solutions business.
CEO Erik Olsson was happy with the results. "During the first quarter of 2018," Olsson said, "we continued to capitalize on the momentum that we generated in the second half of 2017." The CEO said he was particularly pleased with how the tank and pump solutions business did, attributing much of the credit to Mobile Mini's sales force in driving growth.
What's next for Mobile Mini?
Mobile Mini has high hopes for the remainder of 2018. The company expects the positive momentum that the oil and gas business has seen to continue into the current quarter, with utilization remaining strong. A healthy pipeline of pending orders in both the tank and pump area and the storage solutions business in North America should help to keep Mobile Mini moving in the right direction, even as Brexit-related concerns have been holding back its U.K. presence to some extent.
Over the long haul, Mobile Mini has realistic ambitions for growth. The company sees rental revenue rising at a pace equal to overall economic growth as measured by GDP plus 2 to 3 percentage points, with dividends growing at 10% per year and a return on capital exceeding the company's cost of capital.
Mobile Mini shareholders seemed to react negatively to the slight earnings miss, and the stock fell 5% on Friday following the announcement. Yet with better growth prospects on the horizon, long-term investors should be pleased with Mobile Mini's progress thus far and its potential for further gains in the future.
