Why CAI International Stock Dropped 15% Today

The transportation finance and logistics company continued stacking up profits in Q4, but just not as fast as Wall Street would have liked.

Rich Smith
Rich Smith
Feb 21, 2019 at 2:04PM
Industrials

What happened

CAI International (NYSE:CAI), a transportation finance and logistics company, saw its stock plummet Thursday morning, leaving it down 15.1% as of 12:05 p.m. EST.

On Wednesday night, CAI reported Q4 earnings that fell far short of Wall Street expectations. Analysts had been looking for CAI to report profits of $1.07 per share on sales of $121.2 million. Instead, it said it earned only $0.89 per share on sales of $115.6 million.

Cargo containers and cranes at a port

CAI International, which provides shipping containers among other services, disappointed investors in the fourth quarter. Image source: Getty Images.

So what

What's worse, although CAI's sales represented 23% growth over Q4 2017 levels, profits plunged by more than half from the $1.81 per share in the year-ago quarter. Recognizing this, management urged investors to focus on the company's performance for the whole year instead, and not fixate on a single quarter's results.

"2018 was a tremendous year for our company as we expanded each of our core businesses," CEO Victor Garcia wrote in commenting on the results. Both lease-related revenue and logistics revenue hit new records for the company, and despite Q4's disappointment, full-year profits of $3.71 per diluted share were actually up from the $3.68 earned in fiscal 2017.

What's more, Garcia said, even if Q4 results were down year over year, they "remained very strong," and CAI maintained 99.2% utilization of its container fleet.

Check out the latest CAI earnings call transcript.

Now what

Although management did not include guidance for the new year in its earnings release, Garcia said that "with utilization at 99% and 92% of our on-lease owned fleet ... on long-term committed leases," CAI is entering 2019 "from a position of strength." Analysts are predicting CAI will earn $4.25 per diluted share this year -- nearly 15% growth over 2018 levels. With CAI stock selling for less than 5 times earnings after its sell-off, investors may be jumping off this train too early.