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Investors in GATX Corporation (NYSE:GATX) had a good week, as its shares rose 5.4% to close at US$92.80 following the release of its annual results. Revenues of US$1.2b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$4.27, missing estimates by 7.2%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, GATX's dual analysts currently expect revenues in 2021 to be US$1.23b, approximately in line with the last 12 months. Statutory earnings per share are predicted to accumulate 8.6% to US$4.66. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.22b and earnings per share (EPS) of US$3.97 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the substantial gain in earnings per share expectations following these results.
The consensus price target was unchanged at US$90.75, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's also worth noting that the years of declining sales look to have come to an end, with the forecast for flat revenues next year. Historically, GATX's sales have shrunk approximately 1.8% annually over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 5.9% per year. So it's pretty clear that, although revenues are improving, GATX is still expected to grow slower than the industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards GATX following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on GATX. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2022, which can be seen for free on our platform here.
We don't want to rain on the parade too much, but we did also find 4 warning signs for GATX (1 doesn't sit too well with us!) that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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