GATX Earnings Underperform
GATX Corporation (GMT), a leader in leasing transportation assets, reported adjusted first quarter 2013 earnings of 60 cents per share, missing of the Zacks Consensus Estimate of 68 cents. Earnings showed 13% deterioration from 69 cents reported in the year-ago quarter. Adjusted earnings for the first quarter excluded the unfavorable impacts of benefits from tax adjustments and other items of $1.3 million (3 cents per share).
Revenues increased 6.2% year over year to $272.3 million but missed the Zacks Consensus Estimate of $285 million.
Profits decreased to $80.7 million from $81.6 million in the year-ago quarter. Total operating expenses (including ownership cost, and other costs and expenses) increased to $220.8 million from $203.3 million in the year-ago quarter.
Segment Results
Profit from the Rail North America segment increased to $50.3 million in the reported quarter from $50.7 million in the year-ago quarter.
GATX’ Lease Price Index (LPI) improved substantially to 30.8% from 19.2% in the year-ago quarter. Further, the term of lease renewals increased to 65 months from 55 months in the comparable quarter last year.
The North American fleet totaled approximately 109,637 cars compared with 109,116 cars at the end of first quarter 2012. Fleet utilization decreased to 97.8% from 98.5% in the year-ago quarter.
Adjusted profit from the Rail International segment was $20 million, up from $10.4 million in the year-ago quarter. Adjusted income excluded the impact of $1.4 million related to pre-tax adjustment and other items. The European wholly owned tank car fleet totaled approximately 21,896 compared to 21,064 in the year-ago quarter. Fleet utilization was 95.5% versus 96.7% in the year-earlier quarter.
Profit from Portfolio Management was $12.5 million compared with $22.0 million in the year-ago quarter. The segment currently comprises approximately $766.3 million of owned assets (including on and off balance sheet assets) and third-party managed portfolios of approximately $140.7 million.
Profit from the American Steamship Company (:ASC) segment dipped 0.8% year over year to $2.1 million in the first quarter. The decline was due to lower operations in the winter season.
Liquidity
The company exited first quarter, with cash and cash equivalents of $321.1 million compared with $234.2 million in 2011.
Guidance
GATX maintains its full-year 2013 earnings estimates at $3.10 to $3.20 per diluted share.
Other Stocks
Other stocks worth considering within the sector are American Railcar Industries, Inc. (ARII) FLY Leasing Ltd. (FLY) and The Greenbrier Companies, Inc. (GBX). All have a Zacks Rank #2 (Buy) rating.
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 joint venture with Rolls Royce is also producing strong results for the company, uplifting its competitive position against rivals.
The company currently retains a Zacks #3 (Hold).
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