Highlighted stocks include Textainer Group Holdings Limited (TGH), NorthWestern Corporation (NWE), Encore Wire Corporation (WIRE), and The GEO Group,Inc. (GEO).

Textainer Group Holdings Limited (TGH), which leases standard and special dry freight marine containers to international shipping lines, on Nov 5 beat Wall Street estimates for the quarter ending Sep 30 by 16.28%, or 7 cents a share. It was the third consecutive estimate surprise.

Revenue rose by 7% to $69.7 million from $65.3 million in the third quarter 2007. Despite the tough economic conditions, the company is still seeing demand.

“Overall demand for our containers through September remained strong. Textainer’s utilization increased by almost 3% to 97% from the second quarter of 2008 to the third quarter of 2008,” said John A. Maccarone, President and CEO.

Company Outlook

Textainer is cautious going forward given the slowdown in the world economies. TGH reported in its third quarter results that it has been advised by some of its customers that they plan to reduce the size of their container fleets because of lower cargo volumes.

Additionally, the company expects that container ship capacity will expand by 10-12% worldwide in 2009, which will pressure freight rates lower.

Because of these market conditions, TGH expects the extension of leases on in-fleet containers will become a more important aspect of Textainer’s business in 2009.

Consensus Estimates Rise

Covering analysts are still optimistic about the fourth quarter and 2008. Fourth quarter estimates are up a penny to 46 cents in the last 30 days. 2008 estimates rose 2 cents to $1.90 in that same time period.

Consensus estimates for 2009 are murkier having fallen to $1.82 from $1.85 in the last month. One covering analyst lowered during that period.

Value Fundamentals

Textainer was a Zacks #1 Rank (strong buy) stock when we reviewed it on June 20, 2008 and is now a Zacks #2 Rank (buy) stock.

Because of the drop in share price, Textainer is now trading at only 4.5x forward earnings. Its price-to-book ratio has dropped from 2.31 in June to just 0.88.

The dividend yield has also soared. The yield was a solid 4.40% in June and is now 11.20%. The company announced on Nov 4, it would pay 23 cents per share, payable on Nov 26 to shareholders of record on Nov 17. Textainer said it was taking a cautious approach to the dividend given the global climate.

Read the June 20, 2008 analysis.

Update to Previous Value Zacks Rank Buy Stocks

NorthWestern Corporation (NWE), the provider of electricity and natural gas in the Upper Midwest, raised 2008 guidance in October as electricity rates have risen compared to 2007. The company currently pays a dividend with a solid 6.00% yield. It is trading with a forward P/E of 11. Read the Dec 23, 2008 analysis.

Encore Wire Corporation (WIRE), the manufacturer of copper electrical wire, beat third quarter estimates by 25.93% even as it navigates the downturn in the construction industry and volatile copper prices. WIRE has a forward P/E of 14.4. Read the Dec 24, 2008 analysis.

The GEO Group, Inc. (GEO), the correctional facilities provider, confirmed 2008 guidance in November as demand for correctional facilities stays strong worldwide. The company is both a growth and a value stock. GEO has a PEG ratio of only 0.70. Read the Dec 26, 2008 analysis.

“TGH” Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

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