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GATX Corp (GATX) Gains on Q3 Earnings Beat; View Intact

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GATX Corporation (GATX - Free Report) delivered impressive earnings results in the third quarter of 2016. The railcar leasing company’s earnings (on an adjusted basis) of $2.25 per share comfortably surpassed the Zacks Consensus Estimate of $1.33. Moreover, earnings improved 48.03% from the year-ago figure. The earnings beat naturally pleased investors as the stock gained in the trading session on Oct 20 to $46.6, up 3.03% over the closing price on Oct 19.

However, the top line declined 6.03% in the third quarter to $362.9 million due to lower Marine operations revenues.  The top line also missed the Zacks Consensus Estimate of $376.8 million.

The company still expects 2016 earnings per share in the band of $5.55 to $5.75. The Zacks Consensus Estimate of $5.61 per share is within the guided range.

We note that GATX Corp. is not the only transportation company to report an earnings beat in the third quarter. Other transportation players like Delta Air Lines (DAL - Free Report) and United Continental Holdings (UAL - Free Report) have also reported better-than-expected earnings in the quarter.

GATX CORP Price, Consensus and EPS Surprise

 

GATX CORP Price, Consensus and EPS Surprise | GATX CORP Quote

Segment-wise Results

Profits at the Rail North America segment declined to $87.9 million from $87 million a year ago. The downside was mainly due to lower revenues. During the reported quarter, GATX Corp.’s Lease Price Index (LPI) decreased 21.4% compared with the 25.6% increase in the same period last year. The metric exhibited a decrease of 25.4% in the second quarter. Furthermore, average lease renewal term for cars included in the LPI was 29 months as against 60 months in the year-ago quarter.

GATX Corp. stated in its press release that Rail North America’s wholly owned fleet had approximately 123,000 rail cars at the end of the third quarter. Fleet utilization came in at 99% as compared with 99.2% in the year-earlier quarter.

Profits at the Rail International segment improved 50.3% year over year to $23.3 million. GATX Rail Europe’s fleet totaled approximately 23,000 rail cars at the end of the reported quarter. Fleet utilization was 95% compared with 95.7% at the end of the third quarter of 2015.

Profits at the Portfolio Management unit were $64.3 million in the third quarter. The unit had incurred a loss of $17.3 million in the third quarter of 2015. A $49.1 million residual sharing fee settlement boosted segmental results. The American Steamship segment recorded profits of $7.8 million in the third quarter compared with the year-ago figure of $10.9 million.

Liquidity

GATX Corp. exited the quarter with cash and cash equivalents of $211.5 million compared with $202.4 million at the end of 2015. Restricted cash was $4.4 million as against $17.3 million at the end of Dec 2015.

Zacks Rank & a Key pick

GATX Corp. currently sports a Zacks Rank #1 (Strong Buy). Another well-ranked transportation stock is Copa Holdings (CPA - Free Report) with the same Zacks Rank as GATX Corp. You can see the complete list of today’s Zacks #1 Rank stocks here.  

For 2016, the Zacks Consensus Estimate for Copa Holdings has climbed 12 cents to $4.57 per share over the last month.

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