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GATX Stock Gains 14% in a Year: What's Driving the Rally?

Zacks Equity Research

Shares of GATX Corporation GATX have outperformed its industry in a year’s time. The stock has gained 14% against the industry’s 9.1% decline.

One-Year Price Performance

Reasons Behind Impressive Price Performance

GATX's history with respect to earnings per share is impressive, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 31.7%.

We are also impressed by the company's efforts to expand its fleet. In this regard, it is imperative to mention that GATX inked a deal with ECN Capital Corporation in November 2018, to buy up to 3,100 railcars from the latter. GATX will shell out up to $229 million for the deal, which primarily includes freight cars with an average age of seven years.

The company’s efforts to reward its shareholders through share buybacks and dividend payments are also encouraging. We note that GATXhas been paying regular dividends consistently since 1919.

The latest dividend hike came in January 2019, when the company raised its quarterly dividend by 4.5% to 46 cents per share. Additionally, GATX’s board cleared a new share repurchase authorization of $300 million, in replacement of the previous one. Notably, the company returned $1.3 billion to its shareholders through dividends and share buybacks in the last 10 years.

GATX apart, other transportation players like J.B. Hunt Transport Services JBHT, Norfolk Southern NSC and Alaska Air ALK raised the respective dividend payouts so far in 2019. The frequent dividend hikes in this sector can be attributed to the current tax law that boosts cash flow owing to huge tax savings.

With increased cash flow, companies are frequently engaging in shareholder-friendly activities among other things.

Bullish Readings & Zacks Rank

Coming back to GATX, the positivity revolving around the stock can be gauged from the fact that the Zacks Consensus Estimate has been revised 0.9% upward over the past 60 days for first-quarter 2019 earnings. The same has been revised 0.4% upward for 2019 earnings.

GATX's trailing 12-month return on equity (ROE) supports its growth potential. The company’s ROE of 11% compares favorably with its industry’s ROE of 9.9%, reflecting efficiency in using shareholders’ funds.

Given the company’s strong fundamentals and positive estimate revisions, it seems like this is the right time to add the stock to your portfolio. The Zacks Rank #2 (Buy) carried by the stock seems to suggest the same. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?

From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.

This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.

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Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
GATX Corporation (GATX) : Free Stock Analysis Report
 
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