McGrath RentCorp (MGRC -1.33%) has started 2019 with the kind of hot streak it hasn't seen in years. All three of the company's operating divisions are performing well and driving top- and bottom-line growth.
The company announced second-quarter numbers after the market closed on Tuesday. Here's a look at what investors need to know from the report.
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McGrath RentCorp results: The raw numbers
| Metric | Q2 2019 | Q2 2018 | Change |
|---|---|---|---|
| Sales | $127.4 million | $117.0 million | 8.9% |
| Net income | $19.5 million | $15.9 million | 22.5% |
| Diluted EPS | $0.79 | $0.65 | 21.5% |
Data source: McGrath RentCorp Q2 2019 earnings release.
What happened with McGrath RentCorp this quarter?
The high-level numbers look great, but it's the segments that investors always need to focus on. Usually there's a segment that's performing well and another that struggles, but that wasn't the case in Q2.
- Mobile modular rental revenue jumped 17% to $44.7 million as management grew the fleet and increased prices. Income from operations rose 38% to $16.3 million.
- TRS-Rentelco saw a 15% increase in rental revenue to $25.5 million and income from operations inched up 3% to $8.7 million. A 22% drop in sales revenue to $5.3 million and a decrease in sales margin from 58% to 51% negatively impacted income.
- Rental revenue from Adler Tanks rose 6% to $17.9 million and income from operations was up 20% to $4.8 million.
As fast as the income statement is improving, management isn't saving cash for a rainy day and hasn't been paying down debt, either. Money is either going into buying new equipment or paying a growing dividend.
- Debt grew slightly to $301.9 million and cash on hand was steady at $1.5 billion.
- The dividend was increased 10% from a year ago to $0.375 per share for the quarter.
What management had to say
There weren't many flaws in Q2, and management said demand from commercial and education markets drove the quarter. What really showed McGrath RentCorp's confidence was the increased guidance for the year, which management announced in the earnings release: "Based upon the Company's year-to-date results and current outlook for the remainder of the year, the Company is raising its financial outlook and expects its 2019 total operating profit to increase 9% to 14% above 2018 results, as compared to our prior expectation of a 5% to 10% increase."
The company is having success entering adjacent markets and improving utilization, so the strong performance we've seen in 2019 seems far from over.
Looking forward
McGrath RentCorp is riding strong commercial markets, driven by demand in the energy industry and growing needs from education providers. It should keep growing as long as the economy does, and that's good news for investors right now.
