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Gatx (GATX) Up 1.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Gatx (GATX). Shares have added about 1.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Gatx due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

GATX Q1 Earnings Top Estimates

GATX's first-quarter 2021 earnings of $1.02 per share surpassed the Zacks Consensus Estimate of 86 cents. However, the bottom line declined 22.1% year over year primarily due to lower profitability in the Rail North America segment and disappointing performance in the Portfolio Management unit. 

Total revenues were $305.8 million in the reported quarter. Bulk of the top line (91.8%) came from lease revenues. Marine operating revenues contributed 1.2% to the top line. The balance came from other sources. Meanwhile, total expenses (on a reported basis) inched up 1.4% to $235.7 million.

Other Details

Profits in the Rail North America segment declined to $65.7 million in the first quarter from the prior-year quarter’s level of $72 million. The downside was primarily caused by lower gains on asset dispositions and lower lease revenue in the quarter. The renewal lease rate change of the company’s Lease Price Index (“LPI”) was -18.1% in the reported quarter compared with the year-ago quarter’s 11.6%. Additionally, average lease renewal term for cars included in the LPI was 30 months compared with 31 months in the year-ago quarter.

In fact, Rail North America’s wholly-owned fleet had approximately 116,800 rail cars at the end of Mar 31, 2021. Fleet utilization was 97.8% compared with 99% at the end of first-quarter 2020.

 In the Rail International segment, profits rose to $21.8 million in the first quarter from the prior-year quarter’s level of $13.9 million. Results were driven by more railcars on lease as well as impacts from foreign currency exchange rates.

Also, GATX Rail Europe’s fleet totaled 26,500 rail cars at the end of the quarter. Fleet utilization was 98.2% compared with 98.5% at the end of first-quarter 2020.

The Portfolio Management unit reported segmental profit of $6.1 million in the March-end quarter compared with the segmental profit of $19.5 million in first-quarter 2020. The deterioration was primarily due to lower lease revenue and lower remarketing income at the Rolls-Royce and Partners Finance affiliates.

EPS Guidance 2021

Full-year earnings estimate is kept unchanged at $4.00 to $4.30 per share. 

Liquidity

GATX exited the first quarter with cash and cash equivalents of $958.9 million compared with $292.2 million at the end of 2020.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.


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