GATX Beats 3Q Estimates - Analyst Blog
October 18 2012 - 11:21AM
Zacks
GATX Corporation (GMT), a leader in leasing
transportation assets, reported third quarter 2012 adjusted
earnings of 75 cents per share, which surpassed the Zacks Consensus
Estimate of 66 cents and also improved from the year-ago adjusted
earnings of 67 cents. The year-over-year growth was aided by higher
lease rates, fleet utilization and rising demand for tank cars.
Adjusted earnings for the quarter excluded the impacts of tax
adjustments and Other Items related gains of $18.2 million (or 38
cents per diluted share)
Revenues for the third quarter were $343.4 million, below the
Zacks Consensus Estimate of $363 million, but slightly up from
$337.9 million in the year-ago quarter.
Segment Results
Adjusted profit from the Rail segment
decreased to $65.6 million in the reported quarter from $66.1
million in the year-ago quarter. The segment’s adjusted profit was
mainly impacted by lower remarketing activities and scrap rate
along with increased other expenses.
Adjusted profits for the reported quarter excluded the negative
impacts of $2.1 million related to pre-tax expense and other
items.
GATX’ Lease Price Index (LPI) improved substantially to 26.4%
from negative 9.6% in the year-ago quarter on fewer idle railcars.
Further, the term of lease renewals increased to 59 months from 49
months in the year-ago quarter.
The North American fleet totaled approximately 109,162 cars in
the third quarter compared to 109,091 cars at the end of third
quarter 2012. Fleet utilization remained flat year over year at
98.2%. The European wholly owned tank car fleet totaled
approximately 21,314 cars against 20,828 in the third quarter of
2011. Fleet utilization was 96.6% versus 96.0% in the year-earlier
quarter.
Profit from the Portfolio Management
segment increased to $15.0 million in the reported quarter from
$11.5 million in the year-ago quarter driven by higher asset
remarketing activities. In the reported quarter the segment
comprised approximately $815.1 million of owned assets (including
on and off balance sheet assets) and third-party managed portfolios
of around $147.5 million.
Profit from the American Steamship
Company (ASC) segment was $13.2 million in the third
quarter compared to $8.5 million in the year-ago period. The
year-over-year growth was primarily attributable to higher volumes
and rate improvements.
Liquidity
The company exited third quarter 2012 with cash and cash
equivalents of $430.6 million compared with $248.4 million in
2011.
Guidance
For fiscal 2012, management expects adjusted earnings in the
range of $2.65 - $2.75 per diluted share.
Our Analysis
We believe GATX will remain focused on improving lease pricing,
asset utilization and asset remarketing opportunities. Further,
enhancing infrastructure through investing in railcar also bodes
well given the current momentum in rail intermodal services. The
company’s expansion of asset base to enhance its long-term
performance would remain accretive to increase market traction.
However, we remain on the sidelines due to economic volatilities
and difficult market conditions surrounding its businesses.
Additionally, regulatory pressures and competitive threats from
carriers like American Railcar Industries, Inc.
(ARII) compel us to remain cautious on the stock.
We are currently maintaining our long-term Neutral
recommendation on GATX. For the short-term (1–3 months), the
company has a Zacks #3 (Hold) Rank.
AMER RAILCAR (ARII): Free Stock Analysis Report
GATX CORP (GMT): Free Stock Analysis Report
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