Why Triton International Ltd’s Stock Is Plunging Today

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What happened

Shares of Triton International Ltd (NYSE: TRTN) are getting pounded on Thursday and were down more than 13% at 2:45 p.m. EST. Driving the downdraft is the poorly received fourth-quarter reports of rivals CAI International Inc (NYSE: CAI) and Textainer Group Holdings Limited (NYSE: TGH), which are also plunging today, down 18% and 20%, respectively, by mid-afternoon.

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So what

On the surface, both CAI International and Textainer Group Holdings Limited seemed to report solid fourth-quarter numbers. In CAI International's case, revenue rose nearly 22% year over year, to $94 million, while adjusted net income was $20.7 million, or $1.03 per share. This was well above the year-ago period when net income was $0.6 million, or $0.03 per share.

Further, that result beat the analyst consensus by $0.05 per share. Likewise, Textainer Group Holdings reported expectation-beating results, with its adjusted net income of $14.8 million, or $0.26 per share, coming in $0.07 per share ahead of the consensus estimate. Further, the company reversed its year-ago loss.

That said, while both companies issued bullish outlooks for 2018, each noted some concerning headwinds. "Yields on new leases have slightly moderated as competition increases," according to Textainer's CEO Phillip Brewer. Despite that, Brewer still concluded that returns would "remain at attractive levels" assuming the industry remains disciplined in ordering new containers.

CAI International also warned of "increased competition from container equipment lessors who are active in the market," which CEO Victor Garcia warned would result in lower gains on the sale of older equipment. Further, CAI International's CEO noted that higher interest rates would be a headwind this year.

Now what

Those dimmer views suggest that Triton will offer a similarly weaker outlook when it reports results next week. One of the concerns specific to Triton is that it has been the most aggressive investor in new containers, purchasing $1.6 billion through the third quarter of last year, and had another $100 million on pre-order for 2018. If competition in the container sector and interest rates heat up this year, these new additions might not earn as high as hoped for returns.

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Matthew DiLallo owns shares of Textainer Group. The Motley Fool recommends Textainer Group. The Motley Fool has a disclosure policy.