GATX: ‘Pressure on Revenue Remains’

“Conditions in the North American railcar leasing market are consistent with our outlook coming into the year,” GATX President and CEO Brian A. Kenney said during a first-quarter 2021 earnings announcement. “GATX’s fleet utilization decreased slightly to 97.8% and our renewal success rate was 77.7% for the quarter.”

For Chicago-based GATX Corp., net income from continuing operations for the first three months of 2021 came in at $36.5 million, or $1.02 per diluted share—down 22.67% from the prior-year period’s $47.2 million, or $1.33 per diluted share.

According to the railcar lessor, which reported first-quarter 2021 results on April 20, net income from discontinued operations in was zero vs. a net loss of $0.9 million or $(0.02) per diluted share in first-quarter 2020.

Total revenue for GATX was $305.8 million in first-quarter 2021, up 2.14% vs. $299.4 million in first-quarter 2020.

Following are earnings highlights, by GATX business unit.

Rail North America

GATX reported a first-quarter 2021 segment profit of $65.7 million vs. first-quarter 2020’s $72.0 million—primarily due to “lower gains on asset dispositions and lower lease revenue, partially offset by lower maintenance expense.”

The wholly owned fleet comprised about 116,800 cars, including approximately 13,900 boxcars, as of March 31. The following fleet statistics and performance discussion exclude the boxcar fleet:

• Fleet utilization was 97.8% at the end of the first quarter, compared with 98.1% at the end of the prior quarter and 99.0% at the end of first-quarter 2020, GATX said.

• During first-quarter 2021, the GATX Lease Price Index (LPI) was negative 18.1%. This compares with negative 22.6% in the prior quarter and negative 11.6% in first-quarter 2020. The average lease renewal term for all cars included in the LPI during the first quarter was 30 months, vs. 34 months in the prior quarter and 31 months in first-quarter 2020. According to GATX, investment volume during the first quarter was $109.1 million.

“Conditions in the North American railcar leasing market are consistent with our outlook coming into the year,” GATX President and CEO Brian A. Kenney said. “GATX’s fleet utilization decreased slightly to 97.8% and our renewal success rate was 77.7% for the quarter. While absolute lease rates for many car types modestly increased from the prior quarter, pressure on revenue remains given the continuing high number of idle cars industry-wide. The first-quarter renewal lease rate change of GATX’s Lease Price Index was negative 18.1%, primarily due to energy-related car types.”

Rail International

For first-quarter 2021, segment profit was $21.8 million compared with $13.9 million in the prior-year period. This was “predominately driven by more railcars on lease as well as impacts from foreign currency exchange rates,” according to the company.

As of March 31, GATX Rail Europe’s (GRE) fleet comprised about 26,500 cars, and utilization was 98.2%, compared with 98.1% at the end of the prior quarter and 98.5% at the end of first-quarter 2020.

“Rail International performed as expected,” Kenney said. “GATX Rail Europe maintained high fleet utilization of 98.2% at quarter-end and continues to experience small increases in renewal lease rates. Despite a recent resurgence of COVID-19 in Europe and India, demand for railcars remains stable as we continue to grow and diversify our fleets in both regions.”

Portfolio Management

GATX reported segment profit of $6.1 million in the first quarter, vs. $19.5 million in the prior-year period.  This lower segment profit was “primarily driven by lower lease revenue and lower remarketing income at the Rolls-Royce and Partners Finance affiliates (RRPF),” the company said. “Lower lease revenue in 2021 was partly due to fewer engines on lease as a result of a transaction involving the refinancing and sale of a group of aircraft spare engines in the third quarter of 2020.”

“Within Portfolio Management, the operating environment for the Rolls-Royce and Partners Finance affiliates remains challenging due to the ongoing adverse impact of COVID-19 on international air travel,” Kenney said. “We continue to execute our strategy of capitalizing on difficult market conditions to invest in attractive growth opportunities. Since commencing our program of direct investment in aircraft spare engines in January 2021, we acquired additional Rolls-Royce aircraft spare engines during the first quarter, bringing our total year-to-date investment to approximately $350 million. All of these engines are on long-term leases to a group of strong airline customers and will be managed by RRPF.”

Discontinued Operations

In second-quarter 2020, GATX completed the sale of American Steamship Company (ASC), and that business segment is accounted for as discontinued operations, according to GATX.

2021 Outlook

“We continue to identify opportunities in the current environment to grow our asset base in North America,” Kenney said. “Our commercial team has successfully placed with customers nearly all cars expected to be delivered in 2021 under our supply agreements as well as over 1,000 additional cars outside of the supply agreements that will deliver by mid-2022. First-quarter operating results, and the generally gradual pace of recovery in our markets, are consistent with our expectations. Therefore, our 2021 full-year earnings estimate is unchanged at $4.00 to $4.30 per diluted share.”

More details can be found through GATX Investor Relations.