GATX Corporation (GMT), leading railcar leasing company, reported second-quarter 2014 adjusted earnings of $1.15 per share, ahead ofthe Zacks Consensus Estimate of $1.07. The results also showed a massive improvement from adjusted earnings of 68 cents reported a year ago.
Revenues increased 8% year over year to $365.8 million, but lagged the Zacks Consensus Estimate of $379 million.
Operating expenses increased to $288.6 million from $281.5 million in the year-ago quarter.
Segment Results
Profit from the Rail North America segment increased to $91.7 million in the second quarter from $48.2 million in the year-ago period, driven by higher lease rates and asset remarketing activities.
GATX’ Lease Price Index (LPI) remained flat year over year at 36%. Further, the term of lease renewals was 67 months versus 58 months in the comparable quarter last year.
The North American fleet totaled approximately 106,894 cars compared with 108,648 cars at the end of second-quarter 2013. Fleet utilization increased to 98.6% from 98.2% in the year-ago quarter.
Profit from the Rail International segment was $19.4 million compared with adjusted income (excluding the negative impacts of $3.3 million in pre-tax and other items) of $21.1 million in the year-ago quarter. The decline was due to higher maintenance expense at GATX Rail Europe and no income from GATX’s interest in a joint venture due to disposal.
Rail International fleet totaled approximately 21,684 compared with 21,894 in the year-ago quarter. Fleet utilization was 95.6% versus 95.8% in the second quarter of 2013.
Profit from Portfolio Management was $11.5 million in the second quarter against $17.3 million in the year-ago quarter. The decline in profits was due to lower asset remarketing income.
The segment currently comprises approximately $859.3 million worth of owned assets.
Profit from the American Steamship Company (ASC) segment was $3.1 million compared to $10.1 million in the year-earlier quarter. Impact of weather delays and associated operational costs incurred early in the sailing season affected the quarterly profit.
Liquidity
The company exited the second quarter with cash and cash equivalents of $110.3 million compared with $379.7 million in 2013.
GUIDANCE
GATX maintains its full-year 2014 earnings guidance in the range of $4.15 to $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 carries a Zacks Rank #3 (Hold).
Other Stocks
Other stocks worth considering in this sector include FLY Leasing Ltd. (FLY), The Greenbrier Companies, Inc. (GBX) and Ryder System, Inc. (R). All the stocks carry a Zacks Rank #2 (Buy).
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