Credit: Shutterstock photoGATX Corporation ( GMT ) is in the sweet spot of the global economy. This rail car leasing company is expected to see double digit earnings growth in 2014 and 2015.
GATX was founded in 1898 in the railroad hub of Chicago. It's one of the largest railcar leasing companies in the United States with a North American fleet of 133,000 and a International fleet of 22,000 railcars, which are predominantly tank cars, in Europe.
Through the American Steamship Company ("ASC") and its fleet of 17 self-unloading vessels, it also transports dry bulk commodities on the Great Lakes. Additionally, it operates a portfolio management segment.
Blew It Out in Q1
On Apr 24, GATX reported its first quarter results and easily beat the Zacks Consensus by $0.16. Earnings were $0.90 compared to the Zacks Consensus of $0.74.
North American fleet utilization was 98.5% in the quarter and the renewal success rate during the quarter was more than 85%.
There continued to be strong demand for tank cars and improving demand for certain types of freight cars, such as covered hoppers.
The Rail International division added to its tank car fleet in Europe but the ASC was off to a slow start due to the harsh winter and the sheer amount of ice on the Great Lakes, which lasted longer than usual.
Raised Full Year Guidance
GATX raised the full year earnings range to $4.15-$4.35 from $3.85-$4.05. It will be another record earnings year for the company.
Analysts have pushed the Zacks Consensus up to $4.30 from $3.93 in the last 90 days. That is on the high end of the company's range.
It is also 23% earnings growth for 2014. Analysts are also bullish about 2015 as they expect earnings to grow another 12.2%.
Is There Still Value?
Shares are sitting near 2-year highs but valuations are still attractive.
GATX trades with a forward P/E of just 15.1 which is under the average of the S&P 500 at 16.5. It also has a price-to-book (P/B) ratio of 2.1. A P/B ratio under 3.0 usually indicates value.
This Zacks Rank #1 (Strong Buy) is also passing along the wealth. GATX has an impressive record of paying a dividend every quarter, uninterrupted, since 1919. Not many companies can say that.
In the fourth quarter of 2013, it raised the dividend 6.5%. It currently yields 2.1%.
For investors looking for a way to play the improving global economy, GATX is one to keep on your short list.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec .
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
