GATX 3Q22: Demand ‘Strong,’ Lease Rates Rise

Written by Marybeth Luczak, Executive Editor
“Despite a volatile macro environment, we continue to identify attractive long-term growth opportunities in our markets in addition to the signing of a new railcar supply agreement in North America [with Trinity Industries],” GATX Corporation President and CEO Robert C. Lyons said on Oct. 25.

“Despite a volatile macro environment, we continue to identify attractive long-term growth opportunities in our markets in addition to the signing of a new railcar supply agreement in North America [with Trinity Industries],” GATX Corporation President and CEO Robert C. Lyons said on Oct. 25.

“Demand for railcars remains strong across our global fleets,” GATX Corporation President and CEO Robert C. Lyons said during a third-quarter 2022 financial report on Oct. 25. “Fleet utilization at Rail North America remains high at 99.6% and our renewal success rate was 87.2% during the quarter.”

GATX President and CEO Robert C. Lyons

“Absolute lease rates in North America increased sequentially for the ninth consecutive quarter, and the renewal lease rate change of GATX’s Lease Price Index was positive 37.5% with an average renewal term of 33 months,” Lyons said on Oct. 25. “We recently announced a new committed railcar supply agreement [with Trinity Industries], totaling a minimum of 15,000 railcars, which will enable us to continue serving our large and diverse customer base in North America.”

For the Chicago-based railcar lessor, net income for the three months ended Sept. 30, 2022, came in at $29.1 million, or $0.81 per diluted share—down 27.43% from the prior-year period’s $40.1 million, or $1.11 per diluted share. GATX said the results reflect an impairment charge of $10.8 million, or $0.30 per diluted share, related to its decision to exit the rail business in Russia.

Net income for the first nine months of 2022 was $107.5 million, or $2.99 per diluted share, an increase of 30.94% compared with $82.1 million, or $2.28 per diluted share, at the same point in 2021.

According to GATX, 2022 year-to-date results include “net negative impacts of $55.2 million, or $1.54 per diluted share, from tax adjustments and other items.” Additionally, the 2021 year-to-date results include “net negative impacts of $43.1 million, or $1.20 per diluted share, from tax adjustments and other items.”

RAIL NORTH AMERICA

Rail North America reported profit of $64.3 million in the three-months ended Sept. 30, 2022, down 3.31% compared with $66.5 million in the prior-year period. Year to date, Rail North America reported profit of $237.8 million, rising 13.35% vs. $209.8 million in the same period of 2021. “Higher revenue in the third quarter of 2022 was offset primarily by lower remarketing income due to timing,” GATX said. “Higher 2022 year-to-date results were predominantly driven by higher gains on asset dispositions.”

At Sept. 30, 2022, Rail North America’s wholly owned fleet comprised about 111,500 cars, including more than 10,200 boxcars. The following statistics exclude boxcars. Fleet utilization came in at 99.6% at the end of the third quarter, compared with 99.4% at the end of the prior quarter and 99.2% at the end of third-quarter 2021. During third-quarter 2022, the renewal lease rate change of the GATX Lease Price Index (LPI) was +37.5%. This compares with +18.3% in the prior quarter and –8.1% in third-quarter 2021. The average lease renewal term for all cars included in the LPI during third-quarter 2022 was 33 months, compared with 34 months in the prior quarter and 32 months in third-quarter 2021. Rail North America’s investment volume during third-quarter 2022 was $142.5 million.

RAIL INTERNATIONAL

Rail International’s profit was $14.5 million in third-quarter 2022, down 46.30% from $27.0 million in the prior-year period. Segment profit of $67.7 million year-to-date 2022 fell 11.04% from $76.1 million for the same period of 2021. The third-quarter and year-to-date 2022 results, GATX said, include an impairment charge of $10.8 million related to the decision to exit its rail business in Russia. “Compared to the prior-year periods, results were favorably impacted by more railcars on lease and negatively impacted by changes in foreign currency exchange rates,” the company noted.

At Sept. 30, 2022, GATX Rail Europe’s (GRE) fleet included more than 27,700 cars. Utilization was 99.4% vs. 99.9% at the end of the prior quarter, and 98.1% at the end of third-quarter 2021.

“Rail International performed well during the quarter as Rail Europe and Rail India maintained high fleet utilization and continued to take delivery of new cars to meet robust customer demand,” Lyons reported. 

2022 OUTLOOK

“Despite a volatile macro environment, we continue to identify attractive long-term growth opportunities in our markets in addition to the signing of a new railcar supply agreement in North America,” Lyons said. “Our disciplined asset allocation strategy resulted in investment volume of $203.4 million in the quarter and $887.9 million year to date.

“Based on year-to-date performance and our outlook for the remainder of the year, we expect our 2022 full-year earnings to be at the upper end of our previously announced guidance range of $5.60 to $6.00 per diluted share. This guidance excludes any impact from tax adjustments and other items.”

More details can be found through GATX Investor Relations Website.

Cowen Insight: ‘Solid Results; Guidance Fine-Tuned Upward’

Cowen and Company Transportation OEM Analyst Matt Elkott

“While EPS was a miss in the third quarter, full-year EPS is now expected to be at the upper end of the previously guided range,” Cowen and Company Transportation OEM Analyst Matt Elkott reported. “The LPI was well above our estimate, while average term was below our assumption. Absolute lease rates improved for the ninth consecutive quarter. Utilization ticked up a bit. Demand remains solid.”

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