Mobile Mini Suffers From Sluggish Infrastructure Activity

Infrastructure spending has captured a lot of headlines lately, with the federal government looking more closely at funding projects that would help spearhead improvements to aging infrastructure assets. Many companies would potentially benefit from those efforts, and storage specialist Mobile Mini (NASDAQ: MINI) believes that second-order effects from the customers it serves could provide a boost to growth as well. Yet so far, major projects haven't materialized, and that has held back Mobile Mini.

Coming into Thursday's first-quarter financial report, Mobile Mini investors expected weaker earnings, although they hoped that the company might be able to eke out a tiny sales gain. Mobile Mini's results weren't quite what those investors had wanted to see, but executives remain optimistic that improving conditions should lead to better results in the near future. Let's take a closer look at Mobile Mini to see how it did and what lies ahead for the storage provider.

Image source: Mobile Mini.

Mobile Mini takes a small hit

Mobile Mini's first-quarter results once again showed some of the challenges that the company faces in the current economic environment. Total revenue was down 1% to $123.5 million, which fell short of the fractional percentage increase that many were expecting. Adjusted net income fell by a more alarming 12% to $10.9 million, and that produced adjusted earnings of $0.25 per share. That number fell just short of the $0.26 per share consensus forecast among those following the stock.

A deeper look at the results shows that Mobile Mini saw a bigger decline in its key rental revenue than in its overall business, falling more than 2% from year-ago levels. Outright sales of storage units make up only a small portion of Mobile Mini's business, but a 16% jump in revenue from those activities helped offset the poorer performance on the rental side of the business. From a segment perspective, the storage solutions business held up quite well, seeing 2% gains on the top line, but the tank and pump solutions division dealt with double-digit percentage revenue declines and a net operating loss of $542,000, reversing a year-ago segment profit.

Mobile Mini's operational results were also mixed. Store counts fell slightly, with a rise in combined storage and tank and pump locations only partially offsetting a decline in stand-alone storage solutions locations. Fleet size was up slightly, but utilization rates remained between 60% and 70%, with the tank and pump solutions division coming in at the low end of that range. On a positive note, however, activations for storage solutions climbed by nearly 9%, and rising rental rates also helped support growth.

Can Mobile Mini start moving ahead?

CEO Erik Olsson saw the cross-currents affecting its business. Pointing to gains in the storage solutions business, Olsson said that "this growth demonstrates that our expanded sales force is gaining traction and gives us confidence that we will continue to drive additional revenue increases in the future." Yet the CEO acknowledged the weakness in the tank and pump business, blaming "fewer large infrastructure projects and deferred maintenance activity in the first quarter of this year, negatively impacting our diversified and downstream business segments."

Yet even its mixed performance didn't change Mobile Mini's generally favorable outlook. The company saw improving conditions in the tank and pump business toward the end of the first quarter. As Olsson described it, "While market fluctuations and the timing of projects creates some variability in year-over-year comparisons, our outlook remains positive for the rest of 2017."

One area that Mobile Mini is counting on to power future growth is its commitment to customer service. Along those lines, the company said that it attained its highest average net promoter score in any quarter in its history, reflecting the willingness of Mobile Mini's customers to recommend its services to friends or colleagues. With a score of 87.4 out of 100, Mobile Mini believes that it's doing a good job of being customer-friendly and driving its business forward.

Mobile Mini shareholders didn't immediately respond to the news, but even though immediate results were a bit disappointing, the fundamental case for the company's long-term strategy remains unchanged. As industry conditions among its customers start to improve, Mobile Mini should reap the rewards of greater business growth, and a lot depends on the timing of when things like infrastructure project activity speed up going forward.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Mobile Mini. The Motley Fool has a disclosure policy.