GATX

GATX Corp

Industrial/Transportation


Presented:06/19/2018
Price:$71.22
Cap:$2.74B
Current Price:$133.60
Cap:$4.76B

Presented

Date06/19/2018
Price$71.22
Market Cap$2.74B
Ent Value$6.78B
P/E Ratio5.31x
Book Value$48.81
Div Yield2.47%
Shares O/S38.50M
Ave Daily Vol259,890
Short IntN/A

Current

Price$133.60
Market Cap$4.76B
GATX Corp. engages in leasing and owning railcar and fleets in North America, Europe, and Asia. It operates business through the following segments: Rail North America, Rail International, American Steamship Company (ASC), and Portfolio Management. The Rail North America segment provides railcars pursuant to full-service leases under which it maintains the railcars, pays advalorem taxes and insurance, and provides other ancillary services. The ASC segment provides waterbone transportation of dry bulk commodities such as iron ore, coal, limestone aggregates, and metallurgical limestone, which serve end markets that includes steel making, domestic automobile manufacturing, electricity generation, and non-residential construction. The Portfolio Management segment is composed primarily of ownership in a group of joint ventures with Rolls-Royce plc that lease aircraft spare engines, as well as five liquefied gas-carrying vessels, the Norgas Vessels. The company was founded in 1898 and is headquartered in Chicago, IL.

Publicly traded companies mentioned herein: Berkshire Hathaway Inc (BRKA), GATX Corp (GATX), Rolls-Royce Holdings PLC (RR/ LN), Trinity Industries Inc (TRN), Wells Fargo & Co (WFC)

Highlights

The presenter is short shares of GATX Corp (GATX), the global railcar lessor, citing the potential for lower rates on lease renewals leading to an earnings shortfall relative to Street expectations in coming years. North American railcar leasing represents ~2/3 of the business’ earnings, and the average contract is 3 - 6 years in length. With the market’s last peak in 2013, leases should be rolling over at lower rates from now through 2020. To be fair, he acknowledged that the macro data has been constructive lately, but looking out to 2019, the Street is forecasting ~$4.90 of EPS for GATX. However, based on his model, EPS could be $3.50. At 15x, the fair value is $52.50, or 25% - 30% below today’s level.

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