Gatx (GATX) Up 3.4% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Gatx (GATX). Shares have added about 3.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Gatx due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Earnings Beat at GATX in Q1

GATX’s first-quarter 2020 earnings per share came in at $1.31 per share, which surpassed the Zacks Consensus Estimate by 29 cents. Moreover, the bottom line increased 17% year over year on the back of lower marine operating expenses.

Meanwhile, total revenues declined 2.6% year over year to $308.9 million in the first quarter. Total expenses (on a reported basis) rose marginally to $241.6 million in the quarter.

Segmental Results

Profits in the Rail North America segment increased to $72 million from the prior-year quarter’s level of $68.4 million. This upside can be attributed to higher gains on asset dispositions. The renewal lease rate change of the company’s Lease Price Index (LPI) was -11.6% in the reported quarter compared with the year-ago quarter’s +5.2%. Additionally, average lease renewal term for cars included in the LPI was 31 months compared with 39 months in the year-ago quarter.

In fact, Rail North America’s wholly-owned fleet had approximately 117,600 rail cars at the March end of 2020. Fleet utilization was 99% compared with 99.4% at the end of the first quarter.

In the Rail International segment, profits fell 6.1% year over year to $13.9 million. Results were hurt by changes in foreign currency exchange rates.

Moreover, GATX Rail Europe’s fleet totaled 25,400 rail cars at the end of the quarter. Fleet utilization was 98.5% compared with 98.9% witnessed at the end of the prior-year quarter.

In the Portfolio Management unit, profits increased on a year-over-year basis to $19.5 million, driven by the Rolls-Royce and Partner Finance affiliates’ buoyant performance. In addition, the American Steamship segment's profit dropped 64% to $0.9 million in the March-end quarter. Lower tonnage due to COVID-19 impacts have affected the American Steamship segment. In February, GATX inked a $260-million (subject to working capital and other closing adjustments) stock purchase deal with Rand Logistics for the divestiture of the American Steamship Company segment. The transaction is anticipated to close by Jun 30.

GATX suspended its previously-announced 2020 guidance due to uncertainties related to the COVID-19 pandemic.

Liquidity

GATX exited the first quarter with cash and cash equivalents of $570.7 million compared with $151 million at the end of 2019.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

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