GATX 4Q22: ‘Solid Financial Results’

“GATX produced solid financial results in 2022, with each business unit contributing to a positive year,” GATX President and CEO Robert C. Lyons said during a quarterly earnings announcement.

Chicago-based GATX Corp. has reported fourth-quarter 2022 net income from continuing operations of $48.4 million, or $1.36 per diluted share, compared with fourth-quarter 2021’s $61.0 million, or $1.69 per diluted share. For full-year 2022, net income was $155.59 million, or $4.35 per diluted share, versus the prior year’s $143.1 million, or $3.98 per diluted share.

The railcar lessor noted that fourth-quarter 2022 results included “a net negative impact from tax adjustments and other items of $0.18 per diluted share” and a “net positive impact from tax adjustments and other items of $0.11 per diluted share.” Additionally, the 2022 and 2021 full-year results include “net negative impacts from tax adjustments and other items of $1.72 per diluted share and $1.08 per diluted share, respectively.”

“GATX produced solid financial results in 2022, with each business unit contributing to a positive year,” said GATX President and CEO Robert C. Lyons. “Capitalizing on strong demand for existing assets and an improved railcar leasing environment, Rail North America exceeded segment profit expectations. Our commercial team achieved higher renewal lease rates while maintaining over 99% fleet utilization. We continued to improve the efficiency of our maintenance network, completing the vast majority of repair work at our owned facilities. We further optimized our fleet by selectively selling railcars into a robust secondary market, generating $104.6 million in remarketing income for the full year.

“Rail International performed well despite supply chain disruptions that delayed new car deliveries in Europe and India. Demand for railcars in both regions was strong, and Rail Europe continued to experience increases in renewal lease rates compared to expiring rates. In Portfolio Management, the Rolls-Royce and Partners Finance affiliates performed better than we anticipated as long-haul, international air traffic improved from a year ago.

“We capitalized on a number of attractive opportunities to grow our global asset base in 2022. In Rail North America, we invested more than $815 million and entered into a new six-year supply agreement that enhances our ability to meet customer needs. Despite delivery delays internationally, we invested over $176 million at Rail Europe and almost $68 million at Rail India. In the fourth quarter, we increased our direct investment in aircraft spare engines by acquiring five additional engines for nearly $150 million. In total, our 2022 investment volume was over $1.2 billion.”

Rail North America

GATX reported a segment profit of $83.5 million in fourth-quarter 2022, compared to $75.6 million in fourth-quarter 2021. For full-year 2022, segment profit was $321.3 million, compared to $285.4 million in full-year 2021.

The railcar lessor noted that 2021 fourth-quarter and year-to-date results include a “net positive impact of $5.3 million from tax adjustments and other items.” The increase in fourth-quarter 2022 and full-year segment profit was primarily the result of “higher lease revenue and higher marketing income,” according to GATX.

The wholly owned fleet comprised about 109,600 cars, including more than 8,600 boxcars, as of Dec. 31. The following fleet statistics and performance discussion exclude the boxcar fleet:

• Fleet utilization was 99.5% at the end of the fourth quarter, compared to 99.6% at the end of the prior quarter and 99.2% at 2021 year-end, GATX said.
  
  
• During fourth-quarter 2022, the GATX Lease Price Index (LPI) was positive 29.7%, compared to positive 37.5% in the prior quarter and negative 0.7% in the fourth quarter of 2021. The average lease renewal term for railcars included in the LPI during the fourth quarter was 34 months, compared to 33 months in the prior quarter and 37 months in the fourth quarter of 2021. The fourth-quarter renewal success rate was 85.7%, compared to 87.2% in the prior quarter and 89.2% in the fourth quarter of 2021.
  
  
• For full-year 2022, the renewal lease rate change of the LPI was positive 23.4% and the average renewal term was 33 months, compared to negative 8.5% and 32 months in 2021. The renewal success rate for 2022 was 85.5%, compared to 82.7% in 2021. Total investment volume was $815.9 million in 2022, according to the company.

Rail International

For fourth-quarter 2022, segment profit was $18.2 million, compared to $28.9 million in fourth-quarter 2021. This result was “predominately driven by foreign exchange impacts, partially offset by more railcars on lease,” GATX reported.

Full-year segment profit was $85.9 million in 2022, compared to $105.0 million in 2021.

Fourth-quarter 2022 and full-year results include impairment charges of $3.8 million and $14.6 million, respectively, “related to the company’s decision to exit its rail business in Russia,” GATX said.

As of Dec. 31, 2022, GATX Rail Europe’s (GRE) fleet consisted of more than 28,000 cars and utilization was 99.3%, compared to 99.4% at the end of the prior quarter and 98.7% at 2021 year-end.

Portfolio Management

GATX reported segment profit of $23.1 million in fourth-quarter 2022, compared to segment profit of $36.3 million in fourth-quarter 2021. Fourth-quarter 2022 segment profit includes an impairment charge of $2.8 million associated with “the decision to sell the specialized gas vessels,” the company said. This lower segment profit was “driven by lower grains on asset dispositions at the Rolls-Royce and Partners Finance (RRPF) affiliates,” GATX reported.

Full-year 2022 segment profit was $14.7 million, compared to $60.8 million in 2021. Full-year 2022 results include an impairment charge of $34.3 million associated with the decision to “sell the specialized gas vessels and an impairment charge recorded by RRPF, of which GATX’s share is $15.3 million, related to aircraft spare engines in Russia that RRPF does not expect to recover,” the company said. Excluding these impacts, “higher share of affiliates’ earnings from RRPF contributed to favorable 2022 full-year results,” GATX reported.

2023 Outlook

“For 2023, we expect the railcar leasing environment in North America to remain favorable,” said Lyons. “We project slightly higher segment profit at Rail North America as higher lease revenue and continued strength in remarketing income are expected to offset rising interest expense and modestly higher maintenance expense. Rail International’s 2023 segment profit is expected to increase as strong demand for new and existing railcars continues in Europe and India. In Portfolio Management, we anticipate higher earnings from RRPF driven by ongoing improvements in the operating environment for global air travel. Combined with increased earnings from GATX Engine Leasing, we expect Portfolio Management to generate higher segment profit in 2023.

We enter 2023 facing uncertain economic conditions in North America and Europe, continued global supply chain challenges, and a heightened interest rate environment. Fortunately, GATX has a 125-year history of navigating volatile markets, and our global franchise positions us for continued strong performance in the year ahead. Based on our current outlook, we expect 2023 earnings to be in the range of $6.50–$6.90 per diluted share, which would mark another excellent year for GATX.”

More information can be found through GATX Investor Relations.