Textainer Group Holdings Limited (NYSE:TGH) reported its second-quarter results before the market opened on Tuesday. While the container leasing company's lease rental income increased, its overall profitability on a per-share basis sank as a result of lower rental rates and smaller gains of container sales. That said, the company is taking advantage of the market weakness to invest in new containers in order to maintain its position as the world's largest container leasing company.

A look at the numbers
Despite weak market conditions, Textainer's lease rental income increased 3.8% to $128.3 million in the quarter. Driving this growth was a 7.1% year-over-year increase in its total fleet size. With that growth, the company's fleet now totals 3.3 million 20-foot equivalent units, or TEU, which is the largest container fleet in the world. Also strong was utilization, which averaged 97.3% during the quarter and was ahead of the 95.3% it averaged in the year-ago quarter.

That being said, adjusted net income slipped to $37.7 million, or $0.66 per share. This was off from the $40.2 million, or $0.70 per share the company earned in the year-ago quarter. Further, adjusted earnings missed analysts' consensus estimate by $0.07 per share.

The main driver of this decline was weak container sales. The company saw trading container sale proceeds slip from $7.7 million in the year-ago quarter to just $4.2 million this quarter while net gains on the sale of containers also fell from $3.8 million to $1.6 million. The decline was actually even steeper when considering the fact that the company sold a record 95,000 TEU so far this year. Also weak was container-per-diem rental rates, which is why lease rental income didn't grow as fast as its fleet. That said, the company did benefit from lower interest expenses thanks to recent refinancing, which helped to mute some of the market's overall weakness.

A look at the outlook
Textainer expects weak demand to continue during the second half of the year. As a result, it expects its utilization rate to slip while the continuation of excess capacity will likely put additional pressure on used container sales. That being said, the company believes its fleet is well positioned as it not only has the largest fleet but the lowest operating costs in the industry.

The company actually intends to continue to take advantage of the market as it's buying additional containers given that the price of new containers is likely to continue falling. This year it plans to invest more than $570 million to buy more than 225,000 TEU of used and new containers so that it can maintain its position as the world leader. Further, given the low interest rates, the company can add to its fleet without increasing its interest expenses as that continues to fall even as overall debt continues to rise.

Investor takeaway
Textainer is battling a challenging market. But it's holding up fairly well as it's taking advantage of weaker prices to add to its fleet, which is offsetting some of the weakness in rental rates and used container sales. Despite the tough operating environment, Textainer expects that it can continue to deliver above-average returns and solid results. 

Matt DiLallo owns shares of Textainer Group. The Motley Fool recommends Textainer Group. The Motley Fool owns shares of Textainer Group. 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.