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GATX upbeat on 2022 railcar leasing market

Railcar lessor GATX anticipates a favorable railcar leasing market for 2022 amid demand for railcars in North America and Europe.

The company expects market lease rates to increase above average expiring rates for railcars renewing during the year, said GATX (NYSE: GATX) President and CEO Brian A. Kenney in a Tuesday release. Combined with higher asset disposition plans, GATX’s North America segment is expected to see higher segment profit in 2022.

“For the first time in years, the market for North America seems to have turned a corner and has recovered to a point that the GATX fleet has a pricing leverage,” Kenney told investors during GATX’s fourth-quarter earnings call on Tuesday. GATX expects positive lease rate changes upon renewal in 2022. 

GATX also anticipates favorable marketing conditions for its international business, which includes “strong demand” for new and existing railcars in Europe and India, according to Kenney, who said Trifleet earnings in 2022 will also likely remain strong amid brisk demand for tank containers worldwide.

Bob Lyons, GATX’s president for its North America division, agreed with Kenney’s assessment of the North American market.

“The feeling of this recovery is better than the ones we’ve dealt with before because when you look back to 2013, 2014 or even the mid-2000s, some of the accelerant in the market — the spikes that we saw for incredible demand were for very small pockets of car types, the crude boom, what have you — they’re real beneficial in the short term but long term they can cause some damage,” Lyons said. “This recovery seems very different — more fundamental — and I think hopefully we’ll have much more legs to it than prior ones.”

GATX expects 2022 earnings to be in the range of $5.50 to $5.80 per diluted share on “continuing improvement in the North American railcar leasing market combined with the attractive investments made across our global businesses in recent years,” Kenney said.

In 2021, earnings were $3.98 per diluted share, while 2020 earnings were $4.24 per diluted share.

As GATX undergoes a leadership transition in April, with Lyons replacing Kenney as CEO, Lyons said to expect a continuation of the way GATX runs its business and deploys capital.

“You’re going to continue to see us try to leverage the expertise in the markets we have and do so more broadly and globally,” said Lyons, who has been involved with various company initiatives since joining GATX 25 years ago.

4th-quarter 2021 financial results

GATX’s fourth-quarter 2021 net income was $61 million, compared with $17.8 million in the fourth quarter of 2020. 

Diluted earnings per share from continuing operations was $1.69, compared with 50 cents a year ago.

 A net gain on asset dispositions helped lift GATX’s fourth-quarter 2021 results, as did tax adjustments, according to GATX. GATX had completed its sales of the American Steamship Co. in the second quarter of 2020.

Total revenue rose 5% to $321 million, with lease revenue increasing 5% to $288.4 million.

Expenses grew 7% to $248.2 million on depreciation expenses and selling, general and administrative expenses.

(GATX)

“We increasingly outperformed our expectations as we moved through the year. That was especially true for Rail North America,” Kenney said on the Tuesday earnings call about GATX’s 2021 results. Absolute lease rates increased for six consecutive quarters, while solid demand and a diversified fleet helped to support quarterly results.

GATX’s Rail North America segment saw profit of  $75.6 million in the fourth quarter of 2021, compared to $49.5 million in the fourth quarter of 2020. Higher segment profit was primarily due to higher gains on asset dispositions in the quarter, GATX said. The company also said improving market conditions, as well as higher fleet utilization and a higher renewal success rate, helped to boost 2021 results. 

Rail North America’s wholly owned fleet was approximately 114,500 cars, including more than 12,900 boxcars, at the end of fourth quarter, with fleet utilization at 99.2%, compared with 99.2% at the end of the third quarter and 98.1% at the end of 2020.

Rail International’s segment profit totaled $28.9 million in the fourth quarter of 2021, compared to $25.6 million in the fourth quarter of 2020, on more railcars on lease and foreign exchange impacts. 

“Rail International also performed well, despite supply chain and COVID-related interruptions at railcar manufacturers that delayed new car deliveries. Demand for our railcars remained strong in Europe and India,” Kenney said.

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