GATX Corporation leases, operates, manages, and remarkets assets in the rail and marine markets in North America and internationally. The company operates in four segments: Rail North America, Rail International, American Steamship Company (ASC), and Portfolio Management. The Rail North America segment primarily leases railcars and locomotive, as well as other ancillary services. This segment also offers repair, maintenance, modification, and regulatory compliance services on the railcar fleet. The Rail International segment leases railcars, as well as offers repair, regulatory compliance, and modernization work for railcars. The ASC segment operates a fleet of vessels that provide waterborne transportation of dry bulk commodities, such as iron ore, coal, limestone aggregates, and metallurgical limestone for steel makers, automobile manufacturing, electricity generation, and non-residential construction markets. The Portfolio Management segment is involved in leasing, asset remarketing, asset management, and marine operations, as well as manages portfolios of assets for third parties. As of December 31, 2014, it operated a fleet of 17 vessels; a fleet of approximately 126,000 cars, including approximately 19,000 boxcars; and a fleet of 585 older four-axle and 18 six-axle locomotives. GATX Corporation was founded in 1898 and is headquartered in Chicago, Illinois.
(Summary) (Company) (Chart)
15 November 2015
1yr Target $55.80
Payout Ratio 32.82%
1yr Cap Gain 25.61%
1yr Tot Return 29.03%
EPS (ttm) $4.63
EPS next yr $5.29
EPS next 5yr 12.00%
1yr Potential $63.48
Market Cap $1.88 Bil
Revenues $1.47 Bil
Earnings $205.60 Mil
Profit Margin 13.94%
1yr EarnGR 24.79%
3yr EarnGR 23.72%
5yr EarnGR 21.38%
1yr DivGR 6.45%
3yr DivGR 4.35%
5yr DivGR 3.34%
Quick Ratio ---
Current Ratio ---
GATX Rail Business
The company's wholly owned fleet of approximately 149,000 railcars is the largest independent railcar lease fleet in the world. With more than a century of rail industry experience, GATX offers its customers leasing, maintenance, asset, financial, and management expertise. The company currently leases tank cars, freight cars, and locomotives in North America, tank cars and freight cars in Europe and freight cars in India. They also have an ownership interest in approximately 2,800 railcars through investments in affiliated companies, and they actively manage approximately 2,200 railcars for other third party owners. GATX utilizes their extensive rail asset knowledge and experience to remarket both wholly owned and managed rail assets. The following table sets forth their worldwide rail fleet data as of December 31, 2014:
Rail North America
Rail North America is comprised of the company's wholly owned operations in the United States, Canada, and Mexico. Rail North America primarily provides railcars pursuant to full-service leases under which it maintains the railcars, pays ad valorem taxes and insurance, and provides other ancillary services. These railcars have estimated useful lives of 27 to 42 years and an average age of approximately 19 years. Rail North America has a large and diverse customer base, serving approximately 700 customers. In 2014, no single customer accounted for more than 4% of Rail North America’s total lease revenue, and the top ten customers combined accounted for approximately 20% of Rail North America’s total lease revenue. Rail North America leases new railcars for terms that generally range from five to ten or more years, with renewals of existing leases and assignments generally ranging from three to ten years. The average remaining lease term of the North American fleet was approximately four years as of December 31, 2014.
Rail North America’s primary competitors are Union Tank Car Company, CIT Group Inc., General Electric Railcar Services Corporation, First Union Rail, Trinity Leasing, American Railcar Leasing, The Greenbrier Companies, and The Andersons, Inc. Rail North America competes on the basis of customer relationships, lease rate, maintenance expertise, service capability, and availability of railcars.
Rail North America purchases new railcars from a number of manufacturers, including Trinity Industries, National Steel Car Ltd., The Greenbrier Companies, and American Railcar Industries, Inc. They also acquire railcars in the secondary market. During 2014, the company acquired more than 18,500 boxcars from General Electric Railcar Services Corporation for approximately $340 million. In 2011, the company entered into an agreement to acquire 12,500 newly built railcars from Trinity Rail Group over a five-year period (as of December 31, 2014, approximately 4,600 railcars remain to be delivered under the agreement). In 2014 the company entered into a long-term supply agreement with Trinity that will take effect in mid-2016, upon the scheduled expiration of the 2011 supply agreement. Under the terms of that agreement, GATX may order up to 8,950 newly built railcars over a four-year period from March, 2016 through March, 2020, the majority of which will be tank cars.
Rail North America also includes a locomotive leasing business, which consisted of 585 older four-axle and 18 six-axle locomotives as of December 31, 2014. Locomotive customers are primarily Class I, regional, and short- line railroads and industrial users. Leases are typically net leases with terms that vary from month-to-month to 15 years. As of December 31, 2014, the average remaining lease term of the locomotive fleet was approximately seven years.
Rail North America’s primary competitors in locomotive leasing are First Union Rail, CIT Group Inc., and Progress Rail Services Corporation. Competitive factors in the market include equipment condition, availability, customer service, and pricing.
Rail North America also selectively remarkets rail assets, including assets managed for third parties and an affiliate. Remarketing activities generate fees and gains which contribute significantly to Rail North America’s segment profit.
Rail North America operates an extensive network of service facilities in the United States and Canada that perform repair, maintenance, modification and regulatory compliance work on the railcar fleet. The maintenance network is dedicated to performing timely, efficient and high quality repair services in order to keep railcars in service for customers. Maintenance services include interior cleaning of railcars, general repairs to the car body and safety appliances, regulatory compliance work, wheelset replacements, exterior blast and painting, and car stenciling. Rail North America’s maintenance network consists of:
- Six major service centers that can complete any repair or modification project.
- Five field repair centers that primarily focus on routine cleaning, repair and regulatory compliance services.
- Six customer-dedicated sites operating solely within specific customer facilities that offer services tailored to the needs of our customers’ fleets.
- Twenty mobile units that travel to many track-side field locations to provide spot repairs and interior cleaning services, avoiding the need to shop a railcar.
The maintenance network is supplemented by a number of preferred third party service centers. In 2014, third party service centers accounted for approximately 43% of Rail North America’s service center maintenance costs (excluding the cost of repairs performed by railroads).
The company's maintenance activities are substantially dedicated to servicing their wholly owned railcar fleet pursuant to the provisions of their lease contracts. Additionally, their customers periodically require services that are not included in the full-service lease agreement, such as repair of railcar damage.
Rail International is comprised of the company's wholly owned European operations (“GATX Rail Europe” or “GRE”) and a recently established railcar leasing business in India (“Rail India”), as well as one development stage affiliate in China. GRE leases railcars to customers throughout Europe pursuant to full-service leases under which it maintains the railcars and provides insurance and other ancillary services. These railcars have estimated useful lives of 25 to 35 years and an average age of approximately 19 years.
GRE has a diverse customer base with approximately 250 customers. In 2014, two customers each accounted for more than 10% of GRE’s total lease revenue and the top ten customers combined accounted for approximately 64% of GRE’s total lease revenue. GRE’s lease terms generally range from one to ten years and at December 31, 2014, the average remaining lease term of the European fleet was approximately two years.
GRE competes principally on the basis of customer relationships, lease rate, maintenance expertise, service capacity, and availability of railcars. Its primary competitors are VTG Aktiengesellschaft, the Ermewa Group, and Nacco, a subsidiary of CIT Group Inc.
GRE acquires new railcars primarily from Astra Rail Industries S.R.L. and Feldbinder Spezialfahrzeugwerke GmBH. Additionally, GRE’s Ostróda, Poland maintenance facility assembles several hundred tank cars each year. As of December 31, 2014, GRE has commitments to acquire approximately 1,000 newly manufactured railcars to be delivered in 2015.
Rail India began operations in 2012 and was the first leasing company registered under the Indian Railways Wagon Leasing Scheme. In 2014, Rail India focused on pursuing investment opportunities in new and existing flat wagons, and developing relationships with customers, suppliers and the Indian Railways. In 2015, Rail India expects to continue to pursue investment opportunities and grow its fleet of wagons.
GRE operates service centers in Hannover, Germany and Ostróda, Poland that perform significant repairs, regulatory compliance and modernization work for owned railcars. These service centers are supplemented by a number of third party repair facilities, which in 2014 accounted for approximately 39% of GRE’s fleet repair costs.
In India, all railcar maintenance is performed by the Indian Railways or a third party service provider retained by the Indian Railways.
Similar to our Rail North America segment, customers periodically require repair services that are not included in the full-service lease agreement. For GRE, these services are generally related to the repair of damages by customers and railways.
ASC operates the largest fleet of US flagged vessels on the Great Lakes and strives to attain the highest levels of delivery efficiency, safety and environmental responsibility. ASC provides waterborne transportation of dry bulk commodities such as iron ore, coal, limestone aggregates and metallurgical limestone, which serve end markets that include steel makers, domestic automobile manufacturing, electricity generation and non-residential construction. ASC’s sailing season generally runs from April 1 through December 31; however, depending on customer demand and weather conditions, certain vessels may commence operations during March and continue to operate into January of the following year.
At December 31, 2014, ASC’s fleet consisted of 17 vessels with a net book value of $231.0 million and $11.7 million of off balance sheet assets. Fourteen of the vessels are diesel powered, have an average age of 37 years, and estimated useful lives of 65 years. Two steam powered vessels were built in the 1940s and 1950s and have estimated remaining useful lives of five years. The other vessel in ASC’s fleet is a diesel powered articulated tug barge, which is leased by ASC under an operating lease that expires in 2017. Sixteen of ASC’s vessels are generally available for both service contract and spot business and the remaining vessel has dedicated service pursuant to a time charter agreement that is scheduled to expire following the 2015 sailing season.
ASC’s vessels operate exclusively in the fresh water of the Great Lakes and as a result, with proper maintenance and periodic refurbishment, may achieve extended service well beyond the useful life estimates.
All of ASC’s vessels are equipped with self-unloading equipment, enabling them to discharge dry bulk cargo without assistance from shore side equipment or personnel. This equipment enables the vessels to operate twenty-four hours a day, seven days a week. ASC’s vessels are capable of transporting and unloading almost any free flowing, dry bulk commodity. In 2014, ASC served 29 customers with the top five customers comprising 79% of total revenue.
ASC’s vessels operate pursuant to customer contracts that stipulate freight volume and may also be supplemented with additional spot volume opportunities. In 2014, ASC operated 15 vessels and carried 30.5 million net tons of cargo. The number of vessels deployed by ASC in any given year is dependent on customer volume requirements.
ASC’s primary competitors on the Great Lakes are Interlake Steamship Company, Great Lakes Fleet, Inc., Grand River Navigation, Central Marine Logistics, and VanEnkevort Tug and Barge. ASC principally competes on the basis of service capabilities, customer relationships and price.
Portfolio Management generates leasing, marine operating, asset remarketing and management fee income through a collection of diversified wholly owned assets and joint venture investments.
Portfolio Management’s wholly owned portfolio consists of assets subject to operating and finance leases, marine assets operating in pooling arrangements and secured loans. Leased assets primarily include inland marine equipment. Pooled marine assets include multi-gas vessels, chemical parcel tankers and inland barges. Owned assets have estimated useful lives of 5 to 30 years and are either placed with customers pursuant to operating or finance leases, which have scheduled expirations ranging from 2015 to 2027, or in the case of cer- tain marine assets, are operated by a service provider under contractual pooling agreements. Portfolio Management remarkets these assets, generating portfolio proceeds and gains on asset dispositions.
Portfolio Management also manages portfolios of assets for third parties which generate fee and residual sharing income through portfolio administration and remarketing of these assets. Portfolio Management’s investments in affiliated companies primarily include aircraft engine leasing and shipping operations. Portfolio Management’s joint venture partners are typically well-established companies with extensive experience in their respective markets.
This is an excellent company in a business (Railroads) that really interests me. I think this will be an excellent addition to my portfolio but before I add shares to this company I'll need to compare this company's fundamentals against Trinity and Greenbrier. I recently wrote and article comparing those two companies so comparing them to GATX should be an easy exercise. One or more of these companies will surely end up in my accounts.