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Strong Balance Sheet Boosts GATX, Higher Expenses Trouble

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We have recently updated a report on GATX Corporation (GATX - Free Report) .

GATX has a positive earnings surprise of 5.4%, on average (beating estimates three times and missing the same once). The stock has gained 23.1% in the past year compared with a 35.3% rally of the industry .

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GATX's sound liquidity position is encouraging. At the end of third-quarter 2021, the company’s cash and cash equivalents stood at $566 million, higher than its short-term borrowings of $20.7 million. This implies that it has sufficient cash to meet short-term debt obligations.

Profits in the Rail North America segment increased 18.5% year over year to $66.5 million (for the third quarter). The upside was primarily led by higher gains on asset dispositions and lower maintenance expenses. In the Rail International segment, profits rose 12.5% year over year to $27 million in the third quarter. Results were primarily driven by more railcars on lease.

GATX’s third-quarter results were affected by low profitability recorded in the Portfolio Management unit. Segmental profit fell 86% to $6.2 million on a year-over-year basis. The downside was primarily due to a lower share of affiliates’ earnings from the Rolls-Royce and Partners Finance affiliates, among other factors.

Total expenses in the third quarter (on a reported basis) inched up 3.2% to $233.6 million. The upside was primarily led by higher selling, general and administrative expenses (up 9.5%) as well as depreciation expenses (up 9.2%).

Zacks Rank & Other Stocks to Consider

GATX currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Investors interested in the broader Zacks Transportation sector can also consider stocks like Knight-Swift Transportation Holdings Inc. (KNX - Free Report) , Landstar System, Inc. (LSTR - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) .

The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. KNX is benefitting from an improvement in the adjusted operating ratio. The adjusted operating ratio improved to 82.8% in the first nine months of 2021 compared with 86.6% in the year-ago period. In third-quarter 2021, the metric improved to 81.3% from 83.9% a year ago.  

The uptick in the adjusted operating ratio is primarily driven by increased revenues in the Trucking, Logistics and Intermodal segments. Lower the value of the metric, the better. The stock has surged 46.6% in the past year. Knight-Swift sports a Zacks Rank #1.

The long-term expected earnings per share (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy and freight market conditions in the United States.

LSTR’s top and bottom line increased substantially in each quarter from the third quarter of 2020, owing to robust revenues generated from the primary segment — truck transportation. The stock has returned 30.8% in the past year. Landstar also sports a Zacks Rank #1.

The long-term expected earnings per share (three to five years) growth rate for C.H. Robinson is pegged at 9%. CHRW is benefitting from higher pricing and volumes across most of its service lines. Total revenues rallied 42.4% year over year in the first nine months of 2021, with higher revenues across all the segments.

CHRW’s measures to reward its shareholders are encouraging. Driven by the tailwinds, the stock has increased 12.6% in the past year. C.H. Robinson carries a Zacks Rank #2.
 

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