McGrath RentCorp (NASDAQ:MGRC) continues to experience strong demand for everything from modular buildings to tanks for the oil industry and telecom equipment. The company once again reported strong revenue growth in the fourth quarter, and margins continued to expand as well

Heading into 2019, the company expects to ride the wave of growing economic activity. Overall, shareholders should like what they're seeing. 

Modular residential building.

Image source: Getty Images.

McGrath RentCorp: The raw numbers

Metric Q4 2018 Q4 2017 Year-Over-Year Change
Sales $133.1 million $122.2 million  8.9% 
Net income $24.2 million  $117.7 million  (79.4%) 
Diluted EPS $0.99  $4.82  (79.5%) 

Data source: McGrath RentCorp Q4 2018 earnings release. EPS = earnings per share.

What happened with McGrath RentCorp this quarter? 

Digging into segment results helps tell the full story of McGrath RentCorp's quarter, and reveals the one big reason net income was down

  • The biggest reason for the drop in net income seen above is an income tax benefit recognized a year ago. A better measure may be income before income taxes, which jumped from $23.9 million a year ago to $32 million last quarter. 
  • Rental revenue in mobile modular products increased 13% to $42.7 million in the quarter, and income from operations in the segment jumped 54% to $19.4 million. 
  • TRS-RenTelco rental revenue rose 8% to $24 million, while income from operations rose 5% to $8.6 million. 
  • Adler Tanks rental revenue rose 3% to $18.4 million, and income from operations was up 27% to $5.2 million. 
  • A dividend of $0.375 per share was announced and will be payable on April 30, 2019. The payout is a 10% increase from previous dividends. 

There's usually weakness in one of McGrath RentCorp's operating segments, so the fact that all are growing is a great sign for investors. 

What management had to say

Management continued to reiterate that strong results were driven by strategic decisions and operational efficiency, with CEO Joe Hanna saying: 

Mobile Modular, TRS-RenTelco and Adler Tank Rentals delivered operating profit growth of 30%, 14% and 32%, respectively, compared to a year ago. Our strategy to focus on performance improvement initiatives coupled with solid execution from our teams helped deliver these strong results for the year.

What stood out from these comments was high-level guidance for 2019. Management's outlook describes a bright future for this stock. 

Check out the latest McGrath RentCorp earnings call transcript.

Looking forward

Along with earnings, management gave guidance for the full year of 2019. Executives expect rental revenues to grow between 6% and 9% and operating profit to be up 5% to 10%. They clearly think the strong demand and rate environment will continue, and for long-term investors, that's great news.