Tags: GATX | rail | profitable | GMT

GATX Riding a Profitable Rail Recovery

By    |   Friday, 17 February 2012 07:43 AM

Leasing transportation player GATX (GMT) is finding profits in rails. As railroads rebound from a slump, GATX is adding more railcars, raising leasing rates and expanding its fleet.

GATX leases out equipment to the rail, marine and industrial markets. But its railcar assets, which make up 71 percent of sales, are its strongest. The North American railcar fleet totals 109,070 cars and utilization has risen to 98.2 percent.

The European tank car fleet is 20,927, and it’s currently 97.1 percent utilized. The result is that lease renewal prices have jumped substantially.

For fourth quarter 2011, GATX reported total sales of $350.4 million, up 14.4 percent. Net income for the quarter was 67 cents per share, up 60 percent. For the full year, sales were $1.2 billion, up 8.7 percent. Net income rose 36.6 percent to $2.35 per share.

GATX CEO Brian Kennedy attributed these soaring profits to increased lease rates in 2011. GATX also made $615 million in capital expenditures, expanding its North American and European rails. In 2012, Kennedy added that GATX’s plans to raise leasing rates on 20,000 more railcars as their contracts expire.

For 2012, Wall Street’s earnings estimate has risen steadily to $2.62 per share. For 2013, the consensus estimate also has risen, to $3.03 per share.

Long-term outlook

Analysts have split opinions on buying GATX, though. Of the six analysts followed by Thomson/First Call, three have strong buy recommendations and three have holds.

Deutsche Bank analysts have a hold rating, adding that GATX’s long-term outlook remains healthy.

The company reports next April 23.

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