UPDATE: Stifel Upgrades GATX Corp. (GMT) to Buy

Stifel upgraded GATX Corp. (NYSE: GMT) from Hold to Buy with a price target of $62. Analyst Michael J. Baudendistel noted the company’s railcar assets are more diversified than many realize, and he thinks its business model will hold up better than its peer group.

"The company’s railcar assets are more diversified than we believe many realize. Currently, less than 5% of the company’s North American fleet consists of tank cars in crude oil service and covered hoppers in frac sand service. Despite modest declines recently, the manufacturing backlog for the industry remains near a record level at 136,000 units despite, which historically coincides with strong railcar lease rates," said Baudendistel. "The company built its house with bricks by extending lease durations with lease rates at high levels; as a result, the company has $3.6 billion in committed revenue from customers with little credit risk."

"We believe GATX shares are best suited for investors with a multi-year investment horizon that aligns with management’s conservative investment strategy. The main positive catalyst we see is that shares could react positively to 2016 EPS and LPI guidance, as those forward-looking metrics may exceed investors’ expectations. We believe the largest risk to our upgrade is the potential for the high production rates to loosen lease rates across the railcar leasing industry, which could cause investor sentiment to soften further if the company is required to significantly cut lease rates in order to keep railcar utilization rates high," added the analyst.

For an analyst ratings summary and ratings history on GATX Corp. click here. For more ratings news on GATX Corp. click here.

Shares of GATX Corp. closed at $50.52 yesterday.

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