Leading railcar leasing company GATX Corporation (GMT) reported third-quarter 2014 adjusted earnings of $1.14 per share, missing the Zacks Consensus Estimate of $1.16. However, earnings improved compared to the year-ago quarter’s adjusted number of $1.09.
Revenues increased 12.5% year over year to $397.2 million, surpassing the Zacks Consensus Estimate of $391 million.
Operating expenses increased to $303.5 million from $281.1 million incurred in the third quarter of 2013.
Segment Results
Profits from the Rail North America segment climbed to $70.6 million from $57.9 million in the year-ago quarter, driven by higher lease rates and acquired boxcar fleet.
GATX’s Lease Price Index (LPI) moved up to 46.9% in the reported quarter from the year-ago figure of 34.3%. Further, the term of lease renewals was 68 months versus 63 months in the comparable quarter last year.
The North American fleet totaled approximately 107,387 cars compared with 107,843 cars at the end of third-quarter 2013. Fleet utilization increased to 98.8% from 98.5% in the year-ago period.
Profit from the Rail International segment remained flat year over year at $19.7 million compared with adjusted income (excluding the pre-tax benefit from Other Items of $15.1 million) in the year-ago quarter.
Rail International fleet totaled approximately 21,684 compared with 21,894 in the year-ago quarter. Fleet utilization was 95.1% versus 96.3% in the third quarter of 2013.
Profit from Portfolio Management was $16.7 million in the third quarter against $17.7 million in the prior-year period. The decline in profits was due to subdued business from certain ocean-going vessels.
Profit from the American Steamship Company (ASC) segment was $15.2 million compared to $12.9 million in the year-earlier quarter. The growth was owing to increased marine operating revenues, partially offset by higher operating costs due to the operation of more vessels.
Liquidity
The company exited the second quarter with cash and cash equivalents of $59.4 million compared with $379.7 million in 2013.
Guidance
GATX raised its full-year 2014 earnings guidance range to $4.30-$4.45 per diluted share from the previous estimated range of $4.15-$4.35 per diluted share.
Our Analysis
We expect market fundamentals to continue to improve in 2014 for GATX, supporting higher lease rates, carloads, increased asset utilization and remarketing opportunities. The company remains focused on expanding its asset base to enhance its long-term performance. Further, the tie-up with Rolls Royce is generating strong results, strengthening GATX’s competitive position.
GATX presently carries a Zacks Rank #3 (Hold).
Other Stocks
Stocks worth considering in this sector include The Greenbrier Companies, Inc. (GBX), FLY Leasing Ltd. (FLY) and Aircastle LTD (AYR). While Greenbrier Companies sports a Zacks Rank #1 (Strong Buy), FLY Leasing and Aircastle carry a Zacks Rank #2 (Buy).
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