Diversifying a business that has a single specialty might always seem like a good idea. Yet in some cases, the new business you add for diversification purposes can itself create exposure to risks that you didn't necessarily contemplate. For Mobile Mini (MINI), whose mobile storage options were its core business, the decision to diversify by offering tank and pump products to energy companies seemed like a great move when the oil and gas industries were booming, but more recently, that's proven to be a challenge.

Coming into Friday's fourth-quarter financial report, Mobile Mini investors had hoped that the company would post modest sales gains but boost its earnings by a substantial margin compared to previous-year levels. Mobile Mini's results were encouraging, but they weren't quite as good as what most had wanted to see, and that has some shareholders wondering whether the company's moving in the right strategic direction.

Parking lot with trucks and several Mobile Mini storage containers.

Image source: Mobile Mini.

The latest from Mobile Mini

Mobile Mini's fourth-quarter results looked reasonably solid. Revenue of $160.9 million was up almost 10% from year-earlier levels, and that in turn was quite a bit better than the 7% growth that most of those following the stock were looking to see. Adjusted net income of $23.7 million was higher by more than 30% year over year, but the resulting adjusted earnings of $0.53 per share fell short of the consensus forecast among investors for $0.57 per share.

Performance across Mobile Mini's two main business segments was reasonably comparable. The smaller tank and pump solutions unit maintained an edge in growth, with sales climbing 16% from the year-ago period. But the storage solutions segment pulled its weight, contributing an 8% rise in revenue, as Mobile Mini said that its saw record-high seasonal business for the division. Similar results held true for adjusted pre-tax operating earnings performance between the two segments, with an 11% rise for storage solutions looking slow compared to a greater than 30% pick-up for the tank and pump solutions division.

Fundamental business metrics also showed promising moves higher. Average utilization rates for the tank and pump solutions business jumped to 76% for the quarter, up 3 full percentage points. At the same time, a 2.7% rise in storage solutions units on rent helped to bolster that part of the business, with unit utilization coming in at 85.2%.

CEO Erik Olsson was happy with how the company did. "Fourth quarter 2018 results are the culmination of an exception year for Mobile Mini," Olsson said, with those gains coming "despite increasingly challenging comparisons." The CEO was quite pleased at how tank and pump solutions has added to the business over time.

Check out the latest Mobile Mini earnings call transcript.

What's ahead for Mobile Mini?

There's no doubt that Mobile Mini has made huge progress in recovering from its toughest times, but there's still work ahead. As Olsson explains, he believes that "further differentiating Mobile Mini from our competitors by partnering with our customers to develop innovative solutions to their rental needs and striving to continuously improve processes throughout the company" is vital if the business wants to reach its full potential.

Yet there are still concerns on the horizon. One is that Mobile Mini has exposure to the U.K., and the uncertainty surrounding Brexit has led to some general concern. So far, the business there has remained stable, but the potential for disruptions if officials can't negotiate a smooth exit from the European Union is still present. Also, interest expense was up 15% from the year-earlier period, but Mobile Mini has said it intends to be keep deleveraging its balance sheet in an effort to improve its financial stability.

Largely because of the earnings shortfall, Mobile Mini shareholders reacted negatively to the news, and the stock fell 7% at midday following the Friday morning announcement. Investors have to hope that once the energy markets have fully recovered from their difficulties, Mobile Mini will be in the best possible position to capitalize on the resulting growth opportunities there.