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Gatx (GATX) Down 4.7% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Gatx (GATX). Shares have lost about 4.7% in that time frame, underperforming the S&P 500.

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

GATX Outperforms in Q2

GATX's second-quarter 2019 earnings (excluding 8 cents from non-recurring items) of $1.78 per share topped the Zacks Consensus Estimate of $1.32. Moreover, the bottom line improved significantly year over year. Results were aided by higher revenues.

Revenues came in at $359.4 million, marginally outpacing the Zacks Consensus Estimate of $358.9 million. The top line also inched up 2.8% year over year, mainly owing to higher Marine operating revenues and other revenues. Total expenses increased 3.1% to $277.1 million in the reported quarter.

GATX still anticipates 2019 earnings in the range of $4.85-$5.15 per share.

Segment-Wise Results

Profits at the Rail North America segment increased to $85.8 million from $64.2 million a year ago. The improvement was mainly owing to higher gains on asset dispositions in the quarter under review. The renewal lease rate change of the company’s Lease Price Index (LPI) was 2.8% in the reported quarter compared with 16.1% a year ago. Additionally, average lease renewal term for cars included in the LPI was 53 months compared with 41 months in the year-earlier quarter.

In fact, Rail North America’s wholly-owned fleet had approximately 119,500 railcars at the end of the second quarter. Fleet utilization came in at 99.5% compared with 98.9% at the end of the year-ago quarter.

At the Rail International segment, profits surged 66.4% year over year to $21.3 million. Segmental profits benefited from additional railcars on lease.

Moreover, GATX Rail Europe’s fleet totaled approximately 24,000 railcars at the end of second-quarter 2019. Fleet utilization was 98.9% compared with 97.8% at the end of second-quarter 2018.

At the Portfolio Management unit, profits rose 4.4% to $11.9 million, driven by impressive performance of the Rolls-Royce and Partners Finance affiliates. Also, the American Steamship segment's profit soared 51.3% to $12.1 million in the quarter under review.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -17.2% due to these changes.

VGM Scores

At this time, Gatx has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Gatx has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.



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