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GATX Corp's (GATX) Q2 Earnings & Revenues Surpass Estimates

GATX CorporationGATX performed impressively in the second quarter of 2018, reporting better-than-expected earnings per share and revenues. The company's earnings (excluding 15 cents from non-recurring items) of $1.16 per share surpassed the Zacks Consensus Estimate of 92 cents. However, the bottom line decreased 12.1% year over year due to higher costs. Expenses pertaining to the closure of a railcar maintenance facility in Germany weighed on the bottom line in the quarter under review.

Revenues came in at $349.5 million, which outpaced the Zacks Consensus Estimate of $339.6 million. The top line also increased marginally on a year-over-year basis.

Apart from the outperformance, the company raised its outlook for 2018 earnings owing to improved market conditions. For 2018, this Zacks Rank #1 (Strong Buy) company now expects earnings per share between $4.90 and $5.10 (earlier guidance: $4.55-$4.75). You can see the complete list of today's Zacks #1 Rank stocks here.

Also, the Zacks Consensus Estimate for 2018 earnings is pegged at $4.70 per share, which is below the guided range. GATX's encouraging performance in the second quarter as well as its improved earnings view for the current year pleased investors. As a result, the stock gained 8.9% to $84.15 on Jul 19.

Segment-Wise Results

Profits at the Rail North America segment decreased to $64.2 million from $74.9 million a year ago. The decline was mainly due to a reduction in lease revenues apart from lower gains on asset dispositions in the quarter under review. The renewal lease rate change of the company's Lease Price Index (LPI) was -16.1% in the second quarter. Additionally, average lease renewal term for cars included in the LPI was 41 months compared with 32 months in the year-ago quarter.

In fact, Rail North America's wholly-owned fleet had approximately 119,000 rail cars at the end of the reported quarter. Fleet utilization came in at 98.9% compared with 98.8% at the end of the year-ago quarter.

In the reported quarter, profits at the Rail International segment decreased 22.9% year over year to $12.8 million. In the year-ago quarter, results were driven by a rise in railcars on lease and favorable movements related to foreign exchange.

Moreover, GATX Rail Europe's fleet totaled approximately 23,100 rail cars at the end of the second quarter. Fleet utilization was 97.8% compared with 95.7% at the end of second-quarter 2017.

At the Portfolio Management unit, profits decreased 42.4% to $11.4 million. Segmental results were hurt by lower residual sharing fees. However, the American Steamship segment's profit increased 23.1% to $8 million in the reported quarter. Segmental operations were boosted by increased efficiency related to fleet performance.

GATX Corporation Price, Consensus and EPS Surprise

GATX Corporation Price, Consensus and EPS Surprise | GATX Corporation Quote

Liquidity

GATX exited the second quarter with cash and cash equivalents of $237.4 million compared with $296.5 million at 2017 end. Restricted cash was $3.7 million compared with $3.2 million at the end of the previous year.

Upcoming Releases

Investors interested in the broader Zacks Transportation sector are keenly awaiting second-quarter earnings reports from key players like JetBlue Airways Corporation JBLU , Norfolk Southern Corporation NSC and American Airlines Group Inc. AAL . While JetBlue will report on Jul 24, Norfolk Southern and American Airlines will announce the same on Jul 25 and Jul 26, respectively.

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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.

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