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GATX Stock Rallies 9.4% on Q4 Earnings Beat & Y/Y Increase

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GATX Corporation’s (GATX - Free Report) fourth-quarter 2019 earnings per share (excluding 23 cents from non-recurring items) came in at $1.36 per share, surpassing the Zacks Consensus Estimate by 35 cents. Adding to the bullishness, the bottom line of this Zacks Rank #3 (Hold) company surged 61.9% year over year. Earnings growth was aided by lower marine operating expenses. This stellar performance has pleased investors. As a result, the stock gained 9.4% to $82.35 on Jan 23.

Meanwhile, total revenues improved year over year, albeit marginally, to $356.7 million in the final quarter of 2019. Total expenses (on a reported basis) rose 3.6% to $286.7 million in the quarter.

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

Segmental Results

Profits in the Rail North America segment decreased to $61.1 million from the prior year’s $66.6 million. This downside mainly resulted from the 1.9% decline in segmental lease revenues to $214 million. The renewal lease rate change of the company’s Lease Price Index (LPI) was -9.1% in the reported quarter compared with the previous year’s -0.9%. Additionally, average lease renewal term for cars included in the LPI was 37 months compared with 43 months in the year-ago quarter.

In fact, Rail North America’s wholly-owned fleet had approximately 118,000 rail cars at the end of 2019. Fleet utilization was 99.3% compared with 99.4% at the end of 2018.

In the Rail International segment, profits increased 42.2% year over year to $22.9 million. Segmental profits were boosted by a 9.3% increase in lease revenues to $57.5 million.

Moreover, GATX Rail Europe’s fleet totaled 24,600 rail cars at the end of the year. Fleet utilization was 99.3% compared with 98.8% witnessed at the end of 2018.

In the Portfolio Management unit, profits climbed significantly year over year to $27.5 million, driven by the Rolls-Royce and Partner Finance affiliates’ buoyant performance. In addition, the American Steamship segment's profit jumped 57.7% to $19.4 million in the December-end quarter.

GATX Corporation Price, Consensus and EPS Surprise


GATX Corporation Price, Consensus and EPS Surprise

GATX Corporation price-consensus-eps-surprise-chart | GATX Corporation Quote

GATX Paints Rosy Picture for Rail International Unit in 2020

With factors like market oversupply of railcars, sluggish carload volumes and higher railroad velocity expected to prevail through 2020, in turn hurting lease rates, GATX anticipates profits at its Rail North America unit to decline. In fact, GATX expects average lease rate on lease renewals to be lower in 2020 than the average expiring lease rate, thereby eroding the segment’s profitability. However, the Rail International unit’s profits are projected to increase backed by robust demand for new and existing railcars in Europe and India.

Additionally, the company’s Portfolio Management unit is expected to generate higher profit in the ongoing year supported by the Rolls-Royce and Partners Finance affiliates. However, the American Steamship segment's profit is likely to decline marginally in the ongoing year thanks to lower tonnage.

Management anticipates 2020 earnings per share in the $5.50-$5.80 range. The Zacks Consensus Estimate is currently pegged at $5.10.

Upcoming Releases

Investors interested in the Zacks Transportation sector are keenly awaiting fourth-quarter 2019 earnings reports from key players, such as C.H. Robinson Worldwide (CHRW - Free Report) , Alaska Air Group (ALK - Free Report) and Expeditors (EXPD - Free Report) . While C.H. Robinson and Alaska Air will report fourth-quarter earnings on Jan 28, Expeditors will announce the same on Feb 18.

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