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Will GATX Corporation's (GATX) Earnings be a Letdown in Q2?

GATX Corporation GATX is scheduled to report second-quarter 2020 results on Jul 21, before market open.

The Zacks Consensus Estimate for the company’s second-quarter earnings has been constant at 91 cents per share over the past 60 days. Moreover, it has an impressive earnings history, having outperformed estimates in each of the preceding four quarters, the average being 26.4%.

Against this backdrop, let’s delve into the factors, which might have affected the company’s June-quarter results.

Factors Likely at Play

GATX’s overall performance is likely to have taken a hit from COVID-19-induced global economic downturn. Disappointing performance of the Rail International segment is also likely to have adversely impacted the June-quarter results.

This apart, weakness in the North American railcar leasing market with low lease renewals amid the ongoing turmoil is likely to have weighed on the Rail North America segment’s profitability.

Moreover, due to prolonged slowdown in the economy, the company’s operations were severely hampered, which in turn, might have hurt its subsequent quarterly performance. Further, high costs are expected to have dented the bottom line in the to-be-reported quarter.

GATX Corporation Price and EPS Surprise

GATX Corporation Price and EPS Surprise

GATX Corporation price-eps-surprise | GATX Corporation Quote

However, the Portfolio Management unit is likely to have performed well in the second quarter, driven by strength of the Rolls-Royce and Partner Finance affiliates.

Earnings Whispers

The proven Zacks model does not conclusively predict an earnings beat for GATX this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive earnings surprise. However, that is not the case here as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: GATX has an Earnings ESP of 0.00% as the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at 91 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: GATX carries a Zacks Rank #5(Strong Sell), currently.

Highlights of Q1 Earnings

GATX’s first-quarter 2020 earnings per share came in at $1.31, which surpassed the Zacks Consensus Estimate by 29 cents. Moreover, the bottom line improved 17% year over year on the back of lower marine operating expenses. Meanwhile, total revenues dipped 2.6% year over year to $308.9 million in the first quarter. Also, total expenses (on a reported basis) rose marginally to $241.6 million in the period.

Stocks to Consider

Investors interested in the broader Transportation sector may consider United Airlines Holdings, Inc. UAL, Southwest Airlines Co. LUV and Air Lease Corporation AL as these stocks possess the right combination of elements to beat on earnings this reporting cycle.

United Airlines has an Earnings ESP of +25.24% and a Zacks Rank #3, currently. The company will release second-quarter 2020 results on Jul 21.

Southwest Airlines presently has an Earnings ESP of +23.80% and is a #3 Ranked player. The company will release second-quarter 2020 results on Jul 23.

Air Lease has an Earnings ESP of +23.32% and is Zacks #3 Ranked at present. The company will release second-quarter 2020 results on Aug 6.

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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.

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