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GATX Corporation (GMT - Analyst Report), a leader in leasing transportation assets, reported third-quarter 2013 adjusted earnings of $1.09 per share, beating the Zacks Consensus Estimate of $1.00. The results showed an improvement from 75 cents earned a year ago.
    
Adjusted earnings for the third quarter 2013 excluded the impact of benefits from tax adjustments and other items of $2.8 million (6 cents per share).

Revenues increased 6.4% year over year to $353.2 million and were in line with the Zacks Consensus Estimate. Operating expenses increased to $281.1 million from $263.9 million in the year-ago quarter.
    
Segment Results


Profit from the Rail North America segment increased to $57.9 million in the reported quarter from $45.6 million in the year-ago quarter driven by higher lease rates and asset remarketing activities.

GATX’ Lease Price Index (LPI) improved substantially to 34.3% from 26.4% in the year-ago quarter. Further, the term of lease renewals increased to 63 months from 59 months in the comparable quarter last year.

The North American fleet totaled approximately 109,955 cars compared with 109,162 cars at the end of third-quarter 2012. Fleet utilization increased to 98.5% from 98.2% in the year-ago quarter.

Adjusted profit from the Rail International segment was $19.7 million compared with $20 million in the year-ago quarter. Adjusted income excluded the impact of $15.1 million and $2.1 million related to both positive and negative pre-tax adjustment and other items for third-quarter 2013 and 2012, respectively. The European wholly owned tank car fleet totaled approximately 22,041 compared with 21,314 in the year-ago quarter. Fleet utilization was 96.2% versus 96.6% in the year-earlier quarter.

Profit from Portfolio Management was $17.7 million compared with $15 million in the year-ago quarter. The segment currently comprises approximately $852 million of owned assets and third-party managed portfolios of approximately $128 million.

Profit from the American Steamship Company (ASC) segment was $12.9 million compared with $13.2 million in the year-ago quarter.

LIQUIDITY

The company exited the third quarter with cash and cash equivalents of $150.7 million compared with $234.2 million in 2012.

GUIDANCE

GATX maintain its full-year 2013 earnings in the range of $3.20–$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’ competitive position.

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

OTHER STOCKS TO CONSIDER

Other stocks worth considering within the sector are AMERCO (UHAL), Trinity Industries Inc. (TRN - Snapshot Report) and The Greenbrier Companies, Inc. (GBX - Snapshot Report).  AMERCO has a Zacks Rank #1 (Strong Buy) while the other two stocks have a Zacks Rank #2 (Buy).
 

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