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GATX Corporation (GMT - Analyst Report), a leader in leasing transportation assets, reported adjusted second-quarter 2013 earnings of 68 cents per share, missing the Zacks Consensus Estimate of 85 cents. The earnings reflected 15% deterioration from 80 cents reported in the year-ago quarter.

Adjusted earnings for the second quarter excluded the unfavorable impacts of benefits from tax adjustments and other items of $3 million (6 cents per share).

Revenues increased 4.9% year over year to $338.9 million but missed the Zacks Consensus Estimate of $344 million. Operating Profits decreased to $57.4 million from $62.9 million in the year-ago quarter. Total operating expenses (including ownership cost, and other costs and expenses) increased to $281.5 million from $260.2 million in the year-ago quarter.

Segment Results

Profit from the Rail North America segment decreased to $48.2 million in the reported quarter from $53.2 million in the year-ago quarter.

GATX’ Lease Price Index (LPI) improved substantially to 36% from 23.9% in the year-ago quarter. Further, the term of lease renewals decreased to 58 months from 59 months in the comparable quarter last year.

The North American fleet totaled approximately 111,000 cars compared with 109,187 cars at the end of second-quarter 2012. Fleet utilization decreased to 98.2% from 98.3% in the year-ago quarter.

Adjusted profit from the Rail International segment was $24.4 million, up from a loss of $3.6 million in the year-ago quarter. Adjusted income excluded the impact of $3.3 million and $16.3 million related to both positive and negative pre-tax adjustment and other items for second-quarter 2013 and 2012, respectively. The European wholly owned tank car fleet totaled approximately 22,000 compared to 21,209 in the year-ago quarter. Fleet utilization was 95.8% versus 96.3% in the year-earlier quarter.

Profit from Portfolio Management was $17.3 million compared with $14.6 million in the year-ago quarter. The segment currently comprises approximately $828 million of owned assets (including on and off balance sheet assets) and third-party managed portfolios of approximately $129.1 million.

Profit from the American Steamship Company (ASC) segment was $10.1 million compared with $14 million in the year-ago quarter.

The company exited the second quarter with cash and cash equivalents of $96.7 million compared with $234.2 million in 2012.

Guidance

GATX raises its full-year 2013 earnings estimates at $3.20 to $3.30 per share.

Our Analysis

We expect market fundamentals to continue to improve in 2013, supporting higher lease rates, carloads, increased asset utilization and remarketing opportunities. The company remains focused on expanding its asset base to enhance its long-term performance.  Further, the tie-up with Rolls Royce is also generating strong results, strengthening GATX’s competitive position against rivals.

The company currently retains a Zacks #3 (Hold).

Other Stocks to Consider

Other stocks worth considering within the sector are Westinghouse Air Brake Technologies Corporation (WAB - Snapshot Report), Trinity Industries Inc. (TRN - Snapshot Report) and The Greenbrier Companies, Inc. (GBX - Snapshot Report). Westinghouse has a Zacks Rank #2 (Buy) while the other two stocks have a Zacks Rank #3 (Hold).
 
(We are reissuing this article to correct two mistakes. The original article, issued Friday, Jan 25, 2013, should no longer be relied upon.)

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