GATX Corporation (GMT), a leading railcar leasing company, performed encouragingly in the fourth quarter of 2014. The company reported earnings of $1.30 per share in the final quarter of 2014, representing a year over year increase of 14%. The Zacks Consensus Estimate for the quarter was $1.26 per share.
Revenues increased 12.6% year over year to $401.4 million, surpassing the Zacks Consensus Estimate of $389 million. Total expenses increased to $320.1 million from $289.2 million incurred in the fourth quarter of 2013.
Segment Results
Profits from the Rail North America segment climbed to $83.7 million in the final quarter of 2014 from $75.2 million in the year-ago quarter, driven by higher lease rates. Contributions from the recently purchased boxcar fleet also led to the increase.
During the final quarter of 2014, GATX’s Lease Price Index (LPI) increased 39.2% over the weighted-average expiring lease rate. The comparable figure was 37.1% a year ago. Furthermore, the average lease renewal term for cars included in the LPI was 67 months versus 60 months in the comparable quarter last year.
GATX stated in its press release that Rail North America’s wholly owned fleet had cars in excess of 126,000. Fleet utilization increased to 99.2% from 98.5% in the year-ago period.
Profit from the Rail International segment declined 3.5% year over year to $18.9 million. Lower lease revenues and increased maintenance costs at GATX Rail Europe hurt segmental profit.
GATX Rail Europe’s fleet totaled approximately 22,000 cars at the end of 2014. Fleet utilization was 95.9% versus 96.6% at the end of 2013.
Profit from Portfolio Management was $28.1 million in the fourth quarter, up 4.5%. The improvement in profits was due to the increased asset remarketing income. Furthermore, an increased demand for inland marine barges in the reported quarter also boosted the segmental profit.
Profit from the American Steamship Company segment was $10.2 million compared to $5.1 million in the year-ago quarter. The operation of two additional vessels in 2014 boosted segmental profit.
A major development at GATX during the final quarter of 2014 was Trinity Industries Inc.’s (TRN) announcement to deliver 8,950 cars to GATX. This defies concerns that the decline in crude prices will lead to a fall in tank-car orders.
Liquidity
The company exited 2014 with cash and cash equivalents of $209.9 million compared with $379.7 million at the end of 2013.
Guidance
The company expects earnings per share in the range of $5.15 to $5.35 for 2015. The Zacks Consensus Estimate for 2015 currently stands at $5.16 per share.
Zacks Rank
GATX presently carries a Zacks Rank #3 (Hold). Stocks worth considering in this sector include The Greenbrier Companies, Inc. (GBX) and FLY Leasing Ltd. (FLY). While Greenbrier Companies sports a Zacks Rank #1 (Strong Buy), FLY Leasing carries a Zacks Rank #2 (Buy).
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