GATX Corporation
(
GMT
), a leader in leasing transportation assets, has reported first
quarter 2012 adjusted earnings of 69 cents per share, which breezed
passed the Zacks Consensus Estimate of 49 cents.
Adjusted earnings for the first quarter shot up 59.4% from 28
cents per share in the year-ago quarter, primarily on higher lease
rates, improvement in lease terms and higher demand for
locomotives.
Adjusted earnings in the first quarter exclude the negative
impact of special items that amounted to $2.2 million (5 cents per
share).
Revenue for the first quarter grew 7.4% year over year to $284.5
million and surpassed the Zacks Consensus Estimate of $282 million
aided by lease rates, North American fleet utilization and growth
in the lease terms.
Segment Results
Adjusted profit from the
Rail
segment soared to $61.1 million in the reported quarter from $44.4
million in the year-ago quarter. Adjusted profit for the quarter
excludes the negative impact of $2.5 million related to pre-tax
expenses. Lease renewal pricing on cars showed a massive
improvement in lease rated and lowered inventory costs due to the
higher rate of contract renewals.
GATX' Lease Price Index (
LPI
) improved substantially to 19.2% from negative 0.5% in the
year-ago quarter on fewer idle railcars. Further, the term of lease
renewals increased to 55 months from 41 months in the year-ago
quarter.
As of March 31, 2012, the North American fleet totaled
approximately 109,116 cars compared with 109,780 cars at the end of
first quarter 2011. Fleet utilization remained at 98.5% compared
with 97.8% in the year-ago quarter. The European wholly owned tank
car fleet totaled approximately 21,064 cars from 20,524 in the
year-ago quarter. Fleet utilization was 96.7% versus 95.8% in the
year-earlier quarter.
Profit from the
Portfolio Management
segment increased to $22.0 million in the reported quarter from
$10.7 million in the year-ago quarter driven by higher asset
remarketing opportunities. The segment comprises approximately
$831.4 million worth owned assets (including on and off balance
sheet assets) and first-party managed portfolios of approximately
$154.1 million.
Profit from the
American Steamship Company
segment reported profit of $2.1 million versus $0.8 million
in the year-ago period. Given the limited marine operation during
the winter season, the segment's profits remained restricted
compared to the other segments.
Liquidity
The company exited first quarter 2012 with cash and cash
equivalents of $141.0 million, compared with $248.4 million in
2011.
Guidance
For fiscal 2012, management maintained its projected earnings
estimate of $2.40-$2.60 per diluted share.
Our Analysis
We expect GATX Corp. to benefit from higher lease rates and
increased asset utilization and asset remarketing opportunities.
The company's segments remain poised to deliver strong results
given improvements in underlying market fundamentals.
Further, expansion of the company's asset base to enhance its
long-term performance as well as paying higher returns to
shareholders through dividend payments bode well for increased
market traction. However, regulatory pressures and competitive
threats from carriers like
J.B. Hunt Transport Services
(
JBHT
) compel our cautious outlook on the stock.
We are currently maintaining our long-term Neutral
recommendation on GATX. However, for the short term (1-3 months),
the stock has a Zacks #4 Rank (Sell).
GATX CORP (
GMT
): Free Stock Analysis Report
HUNT (JB) TRANS (
JBHT
): Free Stock Analysis Report
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