GATX Corp. (GATX) Tops Q2 EPS by 26c; Raises Outlook

GATX Corp. (NYSE: GATX) reported Q2 EPS of $1.49, $0.26 better than the analyst estimate of $1.23. Revenue for the quarter came in at $358.9 million versus the consensus estimate of $364.73 million.

“Despite continued deterioration of conditions in the railcar leasing market, GATX produced excellent financial results in the second quarter,” said Brian A. Kenney, president and chief executive officer at GATX. “The combination of productivity improvements in our maintenance network, tight management of SG&A, higher than anticipated railcar scrap prices, and continued low interest rates more than offset the market pressure on lease revenue during the quarter. However, revenue pressure is increasing as the year progresses due to the growing oversupply of railcars, fewer car loadings, and improved railroad velocity. Thus, the renewal lease rate change of GATX’s Lease Price Index decreased by 25.4% during the quarter, the average renewal term was 34 months, and the renewal success rate was 62.6%. While lease rate pressure is most significant in cars serving the energy markets, the majority of car types across our fleet and the industry are experiencing various levels of lease rate pressure. Fleet utilization for Rail North America was 98.1% at the end of the quarter with the quarter-over-quarter decline predominantly driven by coal cars.

“Our strategy in this environment remains unchanged: continue to compete aggressively on lease rates to protect utilization and reduce the length of lease term where possible.

“GATX Rail Europe continues to experience stable demand for existing tank cars. At American Steamship Company, 11 vessels continued to sail as favorable operating conditions helped to offset soft demand for iron ore on the Great Lakes. In the Portfolio Management segment, remarketing income during the quarter was approximately $20 million higher than originally anticipated on a pre-tax basis, or approximately $0.30 per diluted share.”

GUIDANCE:

GATX Corp. raises FY2016 EPS to $5.55-$5.75.

For earnings history and earnings-related data on GATX Corp. (GATX) click here.

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