GATX Corp. shares higher on upbeat profit forecast

By Holly LaFon

GATX Corp. shares surged on Thursday even though the Chicago-based railcar leasing company turned in slightly below third-quarter results, as officials offered upbeat guidance for the 2014 year.

In the latest quarter, GATX had net income of $51.3 million or $1.14 per diluted share, compared to $53.8 million or $1.15 per diluted share in the year-ago quarter. Last year’s results were helped by a 6-cent a share benefit from special items, excluding that onetime factor, adjusted earnings a year ago were $1.09 per share.

GATX purchases railroad boxcars, tanker cars and locomotives, then leases that equipment to clients who prefer not to buy the costly capital equipment themselves. That focus tends to make the company sensitive to the economy’s ups and downs, and GATX profits have strengthened in recent years along with the U.S. economy.

In recent years, reduced use of coal-fired generating plants has reduced demand for GATX coal cars. But at the same time, the company has benefited from a big increase in demand for its tanker cars from oil producers in the Upper Midwest who – without a pipeline to carry their product – have begun shipping their petroleum to refiners by rail.

Although the company’s latest per-share earnings landed a penny short of analyst expectations, the company’s shares climbed $3.51, or 6.1 percent, to close Thursday at $60.63.

That’s because GATX also raised its expected earnings per diluted share for the fourth quarter to a range of $4.30 to $4.45 from its previously expected range of $4.15 to $4.35. The company’s upbeat outlook was primarily due to positive railroad trends in North America.

“The increase is based on the strength of the railcar market in North America – utilization is high, lease rates are strong and the demand for railcars in the secondary market is robust,” Jennifer Van Aken, director of investor relations for GATX, said in the third quarter conference call.

Profit at GATX’s North American segment increased 22% to $70.9 million, primarily due to higher lease revenue from increased lease rates and a newly added boxcar fleet, the company said

U.S. rail traffic increased in September for the seventh consecutive month compared to the same month the previous year, an event that has not occurred since 2011, according to the Association of American Railroads. More shipments of the majority of types of commodities are taking place, led by petroleum and petroleum products, September shipments of which increased 28.1% from September 2013.

Results in the company’s international segment were tepid, with profit for the group flat at $19.7 million, excluding special items