GATX Corp's (GATX) Q1 Earnings & Sales Top, Shares Gain

GATX Corporation (NYSE:GATX) reported better-than-expected earnings per share and revenues in the first quarter of 2017. The company’s earnings (on an adjusted basis) of $1.44 per share breezed past the Zacks Consensus Estimate of $1.08.

Revenues of $316.1 million were also above the Zacks Consensus Estimate of $312.2 million. Naturally, the top- and bottom-line outperformance found favor with investors. The stock gained in the trading session on Apr 20 to $62.08, up 3.17% from the closing price on Apr 19.

In fact, the company’s stock has been performing well for quite some time outpacing the Zacks categorized Transportation - Equipment and Leasing industry in the last three months. The stock was up 4.9% compared with the industry’s gain of only 0.4%.

However, in the first quarter both earnings and revenues declined on a year-over-year basis, reflecting the challenging market conditions. While the bottom line contracted 11.11%, revenues declined 5.5%.

Segment-Wise Results

Profits at the Rail North America segment declined to $93 million from $108.7 million a year ago. The downside was mainly due to lower lease revenues and higher maintenance costs. During the reported quarter, GATX Corp.’s Lease Price Index (LPI) decreased 32.6% as against 6.4% increase in the same period last year. The metric declined 36.2% in the previous quarter. Furthermore, average lease renewal term for cars included in the LPI was 29 months in the reported quarter compared with 34 months in the year-ago quarter.

Per GATX Corp.’s press release, Rail North America’s wholly owned fleet had approximately 121,000 rail cars at the end of the first quarter. Fleet utilization came in at 99.1% compared with 98.9% in the year-earlier quarter.

Profits at the Rail International segment improved 6.3% year over year to $13.4 million. The upside was driven by lower maintenance expenses. Moreover, GATX Rail Europe’s fleet totaled approximately 23,100 rail cars at the end of the reported quarter. Fleet utilization was 95% compared with 95.1% at the end of the first quarter of 2016.

Profits at the Portfolio Management unit were $14.7 million in the quarter, down significantly from the year-ago figure of $18.6 million. The American Steamship segment's loss of $0.2 million in the first quarter compared unfavorably with the year-ago profit of $0.9 million.

Liquidity

GATX Corp. exited the quarter with cash and cash equivalents of $155.2 million compared with $307.5 million at the end of 2016. Restricted cash was $3.8 million compared with $3.6 million at the end of 2016.

Outlook for 2017

This Zacks Rank #2 (Buy) company still expects 2017 earnings per share in the band of $4.40–$4.60. In fact, the Zacks Consensus Estimate of $4.53 is within the guided range. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Investors interested in the broader transportation space are also keenly waiting for first-quarter earnings reports from key players like Union Pacific Corporation (NYSE:UNP) , American Airlines Group (NASDAQ:AAL) and Canadian National Railway Company (NYSE:CNI) in the coming days. American Airlines and Union Pacific are scheduled to report on Apr 27, while Canadian National will report on Apr 24.

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