Seaspan Corporation (NYSE:SSW) delivered another solid quarter, as the containership operator was able to beat analyst estimates on both the top and bottom lines. This performance was due in part to the company's growing fleet, which continues to add incremental revenue and cash flow. That fleet growth isn't expected to slow, either, as the company announced several new additions to its future fleet.
A look at the numbers
For the first quarter, Seaspan reported revenue of $188.5 million, up 12% year over year. Revenue also exceeded analyst estimates by about $2 million. Driving that growth was the company's fleet, which grew by one on the quarter and is up six over the past year, to 78. Those six additional ships help to more than offset an increase in scheduled off-hire time, leading to stronger-than-expected revenue growth.
Those new vessels also helped to push the company's normalized earnings to $28.5 million, or $0.25 per share. Those numbers were up 33.2% and 38.9%, respectively, over the prior year's first quarter. Earnings per share also beat analysts' estimates by a penny. Another big driver of the stronger-than-expected earnings growth was a 15.5% decrease in general and administrative expense.
Seaspan also delivered very robust cash available for distribution to common shareholders, which is a proxy for cash flow. The company produced $75.8 million in cash, up 11.6% over the prior year. That was more than enough money to cover the company's dividends, which equates to about $46.8 million per quarter.
A look ahead
Seaspan expects this steady growth to continue for the next few years. The company took delivery of two more ships subsequent to the quarter's end, which will boost revenue and cash flow in the second quarter and beyond. In addition, the company entered into transactions for seven more newbuilds, five of which are already under long-term charter contracts. These new ships, combined with others the company has already announced, will bring its managed fleet to 118 once all are delivered.
The two new ships Seaspan recently accepted for delivery will provide a boost to the second quarter. What's worth noting is that these two ships were the first two of the company's fuel-efficient SAVER design for the larger 14,000 TEU vessels. These ships are expected to keep operating costs lower, leading to higher margins.
Meanwhile, the seven newbuilds the company agreed to purchase are expected to be delivered in 2017. The first five ships are 11,000 TEU vessels, but Seaspan will retain only three, while its joint venture, Greater China Intermodal, or GCI -- which Seaspan manages -- will acquire the other two. Similarly, the other two vessels, which are 10,000 TEU, are subject to Seaspan's right of first refusal with GCI, so it remains to be seen which account these will end up being owned in. Either way, Seaspan still receives some of the benefits once these vessels hit the water and start earning revenue.
Overall, it was another solid quarter for Seaspan. The company continues to add new vessels, which is what drives its growth. With seven more newbuilds on the way and clear visibility to grow its managed fleet to 118, Seaspan is probably going to be able to continue to steadily grow its dividend for years to come.
Matt DiLallo has the following options: short May 2015 $22.5 puts on Seaspan. The Motley Fool recommends Seaspan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.