GATX Corporation‘s (GATXFree Report) second-quarter 2021 earnings (excluding $1.20 from non-recurring items) of $1.35 per share surpassed the Zacks Consensus Estimate of $1.01. The bottom line improved 28.6% year over year, primarily on higher profitability in the Rail North America and Rail international segments.

Adding to this positivity, management lifted its earnings per share guidance for 2021. Improvement in the railcar leasing market in North America was the primary reason behind the guidance hike. Management now expects current-year earnings per share in the $4.30-$4.50 range (earlier view: $4-$4.30). The earnings beat and the raised guidance seemed to please investors. Evidently, shares of GATX appreciated 5.7% to $90.9 on Jul 20.

Coming back to the June-quarter results, revenues of $317.1 million were higher than the year-ago figure of $300.5 million, mainly owing to the 6.8% rise in lease revenues to $287. 6 million. Lease revenues contributed 90.7% to the top line. Marine operating revenues contributed 1.6% to the top line. The balance came from other sources. Total expenses (on a reported basis) inched up 4.6% to $243 million.

Other Details

Profits in the Rail North America segment improved to $77.6 million in the second quarter from the prior-year quarter’s level of $50 million. The upside was primarily led by higher gains on asset dispositions, which indicates a robust secondary market for railcar sales. The renewal lease rate change of the company’s Lease Price Index (LPI) was -6.7% in the reported quarter against the year-ago quarter’s 28%. Average lease renewal term for cars included in the LPI was 29 months compared with 31 months in the year-ago quarter.

In fact, Rail North America’s wholly-owned fleet had approximately 114,800 rail cars at the end of Jun 30, 2021. Fleet utilization was 98.5% compared with 98.7% at the end of second-quarter 2020.

In the Rail International segment, profits rose to $27.3 million in the second quarter from the prior-year quarter’s level of $20 million. Results were driven by more railcars on lease as well as a favorable impact from foreign currency exchange rates.

GATX Rail Europe’s fleet totaled 26,700 rail cars at the end of the quarter. Fleet utilization of 98.4% was flat year over year.

The Portfolio Management unit reported a segmental profit of $12.2 million in the June quarter compared with the segmental profit of $19.3 million in second-quarter 2020. This deterioration was primarily due to lower lease revenues and weak remarketing income at the Rolls-Royce and Partners Finance affiliates.

Liquidity

GATX, currently carrying a Zacks Rank #2 (Buy), exited the second quarter with cash and cash equivalents of $417.9 million compared with $292.2 million at the end of 2020. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sectorial Snapshots

Within the broader Transportation sector, Delta Air Lines (DALFree Report) , J.B. Hunt Transport Services (JBHTFree Report) and Kansas City Southern (KSUFree Report) recently reported second-quarter 2021 results.

Delta incurred a loss (excluding $2.09 from non-recurring items) of $1.07 per share, narrower than the Zacks Consensus Estimate of a loss of $1.41. Revenues of $7,126 million were substantially higher than the year-ago levels, buoyed by the recent uptick in air-travel demand. The metric also topped the Zacks Consensus Estimate of $6,340.9 million.

Kansas City Southern reported second-quarter 2021 earnings (excluding $6.23 from non-recurring items) of $2.06 per share, missing the Zacks Consensus Estimate of $2.16. Quarterly revenues of $749.5 million surpassed the Zacks Consensus Estimate of $733.1 million and increased 36.8% year over year, driven by the 31% rise in overall carload volumes.

J.B. Hunt reported better-than-expected second-quarter 2021 results. Quarterly earnings of $1.61 per share surpassed the Zacks Consensus Estimate of $1.55. Total operating revenues of $2908.4 million outperformed the Zacks Consensus Estimate of $2722 million and also jumped 35.5% year over year.

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