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Triton International Ltd (TRTN-PA)·Q4 2022 Earnings Summary

Executive Summary

  • Q4 delivered resilient profitability amid softening volumes: Adjusted EPS $2.76 and adjusted ROE 25.4%, with total leasing revenue of $416.3M; GAAP diluted EPS was $2.61 .
  • Sequential moderation vs Q3 driven by lower utilization and normalizing disposal gains; management highlighted $0.13 of non-recurring benefits in Q4 (lease buyouts and credit provision reversal) that will not recur in Q1 .
  • Guidance tone: expect adjusted EPS to decrease from Q4 to Q1 on usual seasonality (fewer days), lower used container sale prices/disposal gains, and continued utilization drift; structural protections (long-duration leases, high fixed-rate funding) support strong 2023 performance despite macro uncertainty .
  • Capital returns remain a priority: repurchased 2.8M shares in Q4 (9.1M in 2022) and declared a $0.70 common dividend; preferred dividends across series maintained as disclosed .
  • Versus public consensus (Seeking Alpha): Q4 adjusted EPS beat by $0.06; revenue missed by ~$4.14M, suggesting modest top-line softness but better-than-expected earnings power from lease portfolio and cost discipline .

What Went Well and What Went Wrong

  • What Went Well

    • Durable earnings power: “Triton generated $2.76 of Adjusted net income per share and achieved an annualized Adjusted return on equity over 25%” despite softer demand; FY22 adjusted ROE 28.4% .
    • Structural improvements: extended average lease duration and refinanced debt at low fixed rates following IG upgrade, locking in low-cost long-term financing .
    • Capital allocation: aggressive buybacks (9.1M shares in 2022, -13.8% YoY share count) and maintained $0.70 dividend underscore confidence and accretion .

  • What Went Wrong

    • Utilization and pricing normalization: average utilization fell to 98.4% (Q4) with management expecting further gradual drift as market conditions remain challenging; used container prices and disposal gains expected to decrease more quickly ahead .
    • Sequential deceleration: adjusted EPS down 4.2% QoQ; total leasing revenues slightly below Q3 and below Q4’21, reflecting easing bottlenecks and customer off-hires .
    • Q1 headwinds: typical seasonality (fewest days, weak dry container season) and lack of Q4’s $0.13 non-recurring tailwinds to weigh on Q1 adjusted EPS trajectory .

Financial Results

Headline financials and profitability

MetricQ4 2021Q2 2022Q3 2022Q4 2022
Total leasing revenues ($M)$417.2 $421.6 $424.7 $416.3
Equipment trading revenues ($M)$39.4 $48.1 $44.8 $20.9
Net gain on sale of leasing equipment ($M)$28.1 $35.1 $26.5 $25.2
Operating income ($M)$256.3 $269.7 $263.1 $249.3
Interest and debt expense ($M)$52.7 $54.7 $57.1 $59.8
Net income to common ($M)$177.4 $184.6 $176.8 $152.2
GAAP diluted EPS ($)$2.67 $2.90 $2.88 $2.61
Adjusted net income ($M)$177.5 $186.0 $176.5 $160.7
Adjusted EPS diluted ($)$2.67 $2.92 $2.88 $2.76
Adjusted ROE (%)30.7% 29.8% 27.5% 25.4%

Revenue composition

Revenue components ($000s)Q4 2021Q2 2022Q3 2022Q4 2022
Per diem revenues$383,529 $378,414 $379,623 $369,837
Fee & ancillary revenues$11,092 $13,677 $15,777 $18,213
Total operating lease revenues$394,621 $392,091 $395,400 $388,050
Finance lease revenues$22,541 $29,517 $29,283 $28,257
Total leasing revenues$417,162 $421,608 $424,683 $416,307
Equipment trading revenues$39,423 $48,108 $44,786 $20,860
Equipment trading expenses$(33,354) $(41,706) $(41,106) $(19,079)
Trading margin$6,069 $6,402 $3,680 $1,781

KPIs and capital returns

KPI / Capital ReturnQ4 2021Q2 2022Q3 2022Q4 2022
Average utilization (%)99.6% 99.4% 99.1% 98.4%
Ending utilization (%)99.6% 99.3% 98.8% 98.1%
Cash dividends paid per common share ($)$0.65 $0.65 $0.65 $0.70
Common shares repurchased (period units)1.15M (Q4’21) 1.83M (Q2’22) 3.20M (Q3’22) 2.78M (Q4’22)

Versus estimates (public consensus)

  • Adjusted EPS: $2.76; surprise +$0.06 vs consensus (Seeking Alpha) .
  • Revenue: $416.31M; surprise −$4.14M vs consensus (Seeking Alpha) .
    Note: S&P Global consensus data was unavailable at time of retrieval.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPS trajectoryQ1 2023“Anticipate adjusted EPS will decrease sequentially as utilization and used container sale prices decrease from elevated levels” (Q3 call/PR) “Expect adjusted EPS will decrease from Q4 to Q1 due to seasonality (fewest days), lower used container prices/disposal gains, and lack of $0.13 non-recurring tailwinds” Maintained (sequential decline expected)
UtilizationNear term 2023“Utilization remains exceptionally high and well protected by strong lease portfolio” “Expect utilization will continue to gradually trend down as market conditions remain challenging” Lowered
Used container sale prices & disposal gainsNear term 2023“Used container sale prices remain high; sizable gains on disposals” “Expect used container sale prices and disposal gains will begin to decrease more quickly” Lowered
Common dividendNext paymentRaised to $0.70 (Q3) Declared $0.70 payable Mar 24, 2023 Maintained
Share repurchase authorizationOngoingIncreased back to $200M (Oct-22) Ongoing repurchases; no new change disclosed Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
Macro/trade & supply chainQ2: Tight market, high factory prices, >99% utilization ; Q3: muted peak season; easing bottlenecks; drop-offs increased 2022 trade volumes decreased; bottlenecks eased; customers shifted to fleet reductions Deteriorating macro; normalization from peak
New container prices/productionQ2: Factories quoting ~$2,600/TEU for 20’ ; Q3: new container prices decreased to ~$2,200 for 20’ Limited new production expected in 1H23; short order cycle drives quick rebalance (call) Lower prices/low production; supports future balance
UtilizationQ2: Avg 99.4% ; Q3: Avg 99.1% Avg 98.4% in Q4; expected gradual drift lower near term Gradual decline
Disposal gains/used pricesQ2: exceptionally high gains and trading margins ; Q3: used prices remain high, sizable gains Expect faster decline in used prices and disposal gains Declining
Lease portfolio protectionQ2/Q3: high % on long-term/finance leases; avg remaining duration ~76 months (Q3 commentary) Portfolio remains well protected; expect to maintain high operating/financial performance through 2023 Protective
Capital allocationQ2: shifted to buybacks; authorization reset to $200M ; Q3: accelerated buybacks Repurchased 2.8M shares in Q4, 9.1M in 2022; further 0.6M through Feb 8 Ongoing buybacks

Management Commentary

  • “Triton’s results in the fourth quarter of 2022 provided a strong finish to an outstanding year… $2.76 of Adjusted net income per share and an annualized Adjusted ROE over 25%.”
  • “We… significantly extend[ed] the average duration of our lease portfolio… [and] refinance[d] most of our debt portfolio, locking in low-cost long-term financing.”
  • “We expect our Adjusted net income per share will decrease from the fourth quarter of 2022 to the first quarter of 2023” due to seasonality, fewer days, and lower disposal gains; EPS trajectory expected to turn positive when conditions stabilize and recover .
  • On market rebalancing and production: limited new container production in 1H23; short order cycle typically rebalances supply/demand quickly (call) .

Q&A Highlights

  • Sequential EPS/seasonality: Management reiterated Q1 usually has the fewest days and is seasonally weakest for dry containers; Q4’s $0.13 non-recurring items will not repeat in Q1, shaping the sequential EPS decline (call) .
  • Container supply rebalance: Short order cycle and limited near-term production should help normalize supply/demand as customer excess inventory is absorbed (call) .
  • Leverage and debt mix: Management targets a relatively constant leverage ratio (net debt vs revenue-earning assets, adjusted for preferred and prepayments) and independently manages fixed vs floating mix to hedge long-term leases (Q&A) .
  • Capital returns: Ongoing buybacks viewed as highly accretive given valuation and cash flow profile; share count reduced ~13.8% in 2022 while decreasing leverage .

Estimates Context

  • S&P Global (Capital IQ) consensus estimates were unavailable at the time of retrieval (tool request limit). As a proxy, public consensus from Seeking Alpha indicated Q4 adjusted EPS beat by $0.06 and revenue missed by ~$4.14M .
  • Actuals used in comparisons are from Triton’s press release and 8‑K .

Key Takeaways for Investors

  • Earnings durability remains intact: high long-duration lease coverage and low-cost fixed funding underpin strong ROE through the cycle despite normalization in utilization and disposal gains .
  • Near-term EPS dip is transitory: Q1 seasonality and non-recurring Q4 items explain sequential pressure; management expects EPS trajectory to improve once conditions stabilize, with 2023 EPS targeted to remain strong (call) .
  • Capital allocation is a key lever: ongoing buybacks and a maintained $0.70 dividend signal confidence; buybacks were highly accretive in 2022 and continue into 2023 .
  • Watch utilization and used container prices: further drift lower near term is expected; pace of normalization in disposal gains is the main swing factor for earnings vs expectations .
  • Structural setup into recovery: short order cycle and limited new production in 1H23 should aid balance, positioning Triton to re-deploy assets quickly when demand improves (potential upside catalyst) .
  • Revenue mix: leasing revenues are resilient; equipment trading revenues/margins have already normalized from peak levels—investors should recalibrate expectations accordingly .
  • Dividend and preferreds stable: Common dividend maintained; preferred dividends as declared across series A–E provide clarity on cash obligations .

Citations

  • Q4 2022 8-K Press Release and financial tables:
  • Q3 2022 8-K Press Release:
  • Q2 2022 8-K Press Release:
  • Q4 2022 earnings call transcript/coverage:
  • Q4 2022 press release (company site/PDF):
  • Estimate context (public consensus):