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Why CAI International Stock Dropped 15% Today

Rich Smith, The Motley Fool

What happened

CAI International (NYSE: CAI), a transportation finance and logistics company, saw its stock plummet Thursday morning, leaving it down 15.1% as of 12:05 p.m. EST.

On Wednesday night, CAI reported Q4 earnings that fell far short of Wall Street expectations. Analysts had been looking for CAI to report profits of $1.07 per share on sales of $121.2 million. Instead, it said it earned only $0.89 per share on sales of $115.6 million.

Cargo containers and cranes at a port

CAI International, which provides shipping containers among other services, disappointed investors in the fourth quarter. Image source: Getty Images.

So what

What's worse, although CAI's sales represented 23% growth over Q4 2017 levels, profits plunged by more than half from the $1.81 per share in the year-ago quarter. Recognizing this, management urged investors to focus on the company's performance for the whole year instead, and not fixate on a single quarter's results.

"2018 was a tremendous year for our company as we expanded each of our core businesses," CEO Victor Garcia wrote in commenting on the results. Both lease-related revenue and logistics revenue hit new records for the company, and despite Q4's disappointment, full-year profits of $3.71 per diluted share were actually up from the $3.68 earned in fiscal 2017.

What's more, Garcia said, even if Q4 results were down year over year, they "remained very strong," and CAI maintained 99.2% utilization of its container fleet.

Now what

Although management did not include guidance for the new year in its earnings release, Garcia said that "with utilization at 99% and 92% of our on-lease owned fleet ... on long-term committed leases," CAI is entering 2019 "from a position of strength." Analysts are predicting CAI will earn $4.25 per diluted share this year -- nearly 15% growth over 2018 levels. With CAI stock selling for less than 5 times earnings after its sell-off, investors may be jumping off this train too early.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.