One of the world’s leading railcar leasing firm GATX Corporation (GMT) has announced its collaboration with India-based supply chain and logistics infrastructure solutions provider, Arshiya Rail Infrastructure Ltd. Per the 10-year tie up, GATX will lease 45 newly purchased rail wagons to Arshiya.
Given the current slack in the U.S. economy, the GATX strategy to purchase railcars at a lower market price and lease it on a short-term period during market downtrend also bodes well, allowing it to capitalize more on the current market scenario in the rail freight market.
The emerging rail markets provide growth opportunities over the longer term. The Asian markets are rapidly building infrastructures in order to aid economy. This remains evident by the increase in the U.S. exports to Asian Markets.
According to market reports, countries like India, China, Hong Kong, South Korea and Singapore remain the fastest growing export hubs for the U.S. As a result, we expect these international markets to also remain lucrative to GATX’s business and provide an edge over competitors like J.B. Hunt Transport Services (JBHT).
In Europe, GATX is gaining from higher lease pricing and expansion in wholly owned tank car fleet due to investments in automotives. The increase in the Rail segment’s wholly owned tank car fleet is expected to bring in opportunities for the European tank car business, which will likely drive the growth prospects in Eastern Europe.
Apart from international expansion, GATX Corp. is poised to benefit from renewed or new lease contracts, which will leverage the benefits of higher lease prices.Management outlined the business strategy for the year that will focus on longer lease terms to tap the prevailing higher lease rates for a longer period. Further, management’s constant effort to reduce the number of idle railcars also bodes well for the company’s productivity gains in the future
GATX Corp. remains well positioned to invest with the objective of growing the company’s asset base at attractive valuations when the opportunity arises. Earlier this year, GATX Corp. purchased 12,500 new railcars from Trinity Industries and expects delivery over a five-year period.
The order comprises tanks and freight cars, which are expected to improve service capacity over the long term. Overall, the total rail investments were approximately $143.7 million versus $53.9 million in the year-ago period, reflecting management’s focus on building rail assets for future growth.
We have a long-term Outperform recommendation on GATX Corp. For the short term (1-3 months), the stock holds a Zacks #2 Rank (Buy).
GATX CORP (GMT): Free Stock Analysis Report
HUNT (JB) TRANS (JBHT): Free Stock Analysis Report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment