By: Tracey Ryniec

Is strong customer demand a thing of the past for container companies? TAL International Group (TAL) doesn't think so, predicting that 2012 will mirror the strong results of 2011. This Zacks No. 2 Rank ("buy") continues to be cheap, with a forward price-to-earnings ratio of just 9.2.

TAL International is at the forefront of the global economy because it leases intermodal freight containers and chassis to customers around the world. If shipping is picking up, the company will see it.

Its fleet consists of approximately 1 million containers and related equipment. It operates in 11 countries and has third-party container facilities in 39 countries.

TAL beats in the fourth quarter

On Feb. 13, TAL International kept its earnings surprise streak alive by beating the Zacks Consensus Estimate by 5.2%. It was the eighth earnings surprise in a row.

Earnings per share were $1.02 compared to the consensus of 97 cents. Leasing revenue spiked 31% to $124.1 million from $94.5 million a year earlier.

Because of increased demand, TAL invested heavily in new container purchases and sale-leaseback transactions in 2011. The result was a 24.9% increase in revenue-earning assets in 2011.

Average utilization rates continued to be near record highs in the quarter at 98.6%. For the year, it averaged 98.7%.

Will the good times continue?

TAL is still bullish about 2012. Leasing company depot inventories of used containers are still low. Many of TAL's customers are reluctant to purchase their own containers so they will continue to lease. Supply should remain tight.
 

TAL expects its utilization rates to remain near historic highs in 2012. The company does caution that a severe global recession and potential major customer defaults remain a risk.

2012 Zacks consensus estimate rises

The analysts liked what they heard in the earnings report, because four estimates for 2012 moved higher in the last 30 days while only one was revised lower.

This pushed the Zacks consensus estimate up 7 cents to $3.90. That amounts to basically flat earnings growth because the company earned $3.90 in 2011.

Big dividend

Many investors buy TAL for its juicy dividend, currently yielding 5.8%.

The company gave no indication that the dividend was in any danger of being cut. To the contrary, the company increased its dividend in the fourth quarter to 55 cents per share. It is payable on March 29 to shareholders of record as of March 8.

Still a value stock

TAL was a value stock throughout 2011 and it continues to be so even though shares are near multiyear highs.
 

Its forward price-to-earnings ratio of just 9.2 is well under that of its peers at 13.2. The company also has a price-to-book ratio of 2.1. A P/B ratio under 3.0 usually indicates value.

So far in 2012, the demand for containers doesn't appear to be slowing. TAL remains an attractive value play which rewards shareholders with a solid dividend.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services.

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