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GATX's Earnings and Revenues Steer Past Estimates in Q4

Zacks Equity Research

GATX Corporation GATX delivered impressive fourth-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate.

The transportation company’s earnings (excluding 46 cents from non-recurring items) of 84 cents per share outpaced the Zacks Consensus Estimate of 73 cents. Moreover, the bottom line improved 23.5% on a year-over-year basis. The figures were aided by higher revenues.

Total revenues came in at $356.4 million, beating the Zacks Consensus Estimate of $351.6 million. Moreover, the top line inched up 1% on a year-over-year basis.

Segmental Performance

Profits in the Rail North America segment increased to $66.6 million from $61.2 million a year ago. The upside can be attributed to higher remarketing income and lower railcar maintenance expenses. The renewal lease rate change of the company’s Lease Price Index (LPI) was -0.9% in the fourth quarter. Additionally, average lease renewal term for cars included in the LPI was 43 months compared with 36 months in the year-ago quarter.

Rail North America’s wholly-owned fleet had approximately 122,000 railcars at the end of the reported quarter. Fleet utilization came in at 99.4% compared with 98.2% at the end of 2017.

In the quarter under review, profits in the Rail International segment declined approximately 13.9% year over year to $16.1 million. Results were hurt by expenses related to the closure of GATX Rail Europe’s (GRE) railcar maintenance facility in Germany.

Moreover, GRE’s fleet totaled approximately 23,000 railcars at the end of 2018. Fleet utilization was 98.8% compared with 96.8% at the end of 2017.

In the Portfolio Management unit, profits plunged 51.1% to $4.4 million. Performance in the segment was hurt by lower remarketing income at the Rolls Royce and Partner Finance affiliates (RRPF).

Profits in the American Steamship segment surged more than 100% to $12.3 million in the quarter under discussion. Results were driven by strong demand, improved operational efficiency and favorable operating conditions.

GATX Corporation Price, Consensus and EPS Surprise

 

GATX Corporation Price, Consensus and EPS Surprise | GATX Corporation Quote

Liquidity

This Zacks Rank #3 (Hold) company exited 2018 with cash and cash equivalents of $100.2 million compared with $296.5 million at the end of 2017. Restricted cash was $6.5 million compared with $3.2 million at the end of the previous year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Share Repurchases

In the quarter under review, GATX repurchased around 1.5 million shares for approximately $115 million. As of Dec 31, 2018, the company had around $135 million remaining under its buyback program.

2019 Outlook

GATX anticipates full-year earnings per share (including a net negative non-cash impact of $4 million as a result of the adoption of new lease accounting standard effective in 2019) in the range of $4.85-$5.15. The Zacks Consensus Estimate for the same is pegged at $5.07. Net income is expected to decline in the range of $15 million-$20 million from the 2018 figure.

Furthermore, segmental profit at Rail North America is estimated to be around $40 million-$50 million less than the 2018 level. Increased maintenance costs and higher interest rates are likely to dent segmental profits.

Upcoming Releases

Investors interested in the Zacks Transportation Sector are keenly awaiting fourth-quarter 2018 earnings reports from key players like Canadian National Railway Company CNI, Allegiant Travel Company ALGT and C.H. Robinson Worldwide, Inc. CHRW. While Canadian National and C.H. Robinson are scheduled to report fourth-quarter earnings on Jan 29, Allegiant will release the same on Jan 30.

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