GATX Corporation (NYSE:GATX) Q1 2024 Earnings Call Transcript

GATX Corporation (NYSE:GATX) Q1 2024 Earnings Call Transcript April 23, 2024

GATX Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the GATX Corporation First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Shari Hellerman, Head of Investor Relations for GATX Corporation. Please go ahead.

Shari Hellerman: Thank you, Dennis. Good morning, and thank you for joining GATX's 2024 first quarter earnings call. I'm joined today by Bob Lyons, President and Chief Executive Officer; and Tom Ellman, Executive Vice President and Chief Financial Officer. As a reminder, some of the information you'll hear during our discussion today will consist of forward-looking statements. Actual results or trends could differ materially from those statements or forecasts. For more information, please refer to the risk factors included in our earnings release and those discussed in GATX's Form 10-K for 2023 and elsewhere in our filings with the SEC. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

Before I provide a quick recap of our first quarter results, I'd like to remind everyone that our Annual Shareholders meeting is scheduled on Friday, April 26 at 9:00 a.m., Central time, and will be held in a virtual-only meeting format. Earlier today, GATX reported 2024 first quarter net income of $74.3 million, or $2.03 per diluted share. This compares to 2023 first quarter net income of $77.4 million, or $2.16 per diluted share. The 2024 first quarter results included a net positive impact of $0.6 million, or $0.02 per diluted share from tax adjustments and other items. The 2023 first quarter results included a net negative impact of $1.3 million, or $0.04 per diluted share from tax adjustments and other items. These items are detailed in the supplemental information section of our earnings release.

An engineer examining a high-tech tank and freight car, showcasing the company's innovation in railcars.

Our first quarter results and the operating environment were in line with our expectations coming into the year. GATX Rail North America fleet continues to perform very well with utilization of 99.4% at the end of the first quarter. Our renewal success rate also remained very high at 83.4%. We continue to achieve very strong renewal lease rate increases while also extending term. The renewal rate change of GATX's lease price index was positive 33% for the quarter and the average renewal term was 64 months. Additionally, we continue to successfully place new railcars from our committed supply agreements with a diverse customer base. We've placed all 4,800 railcars from our 2018 Trinity supply agreement and we've placed all 7,650 railcars from our 2018 Greenbrier supply agreement.

In addition, we've placed over 3,600 railcars from our 2022 Trinity supply agreement. Our earliest available scheduled delivery under this supply agreement is in the first quarter of 2025. During the quarter, we also selectively sold railcars in North America and generated $33 million in asset remarketing income. We expect the secondary market to remain robust and anticipate remarketing income to be evenly paced across quarters for the balance of 2024. Rail International had a solid start to the year with stable utilization and a total of over 1,000 new cars delivered between Europe and India during the first quarter. Both GATX Rail Europe and Rail India continue to experience success in pushing up renewal lease rates for most car types. As we noted in the release, we've renamed our Portfolio Management segment to Engine Leasing to reflect the operations of this business segment going forward, as the segment now entirely comprises aircraft spare engine leasing activity.

In Engine Leasing, RPF, our joint ventures with Rolls-Royce, and our wholly-owned engine portfolio are performing well and continuing to benefit from the strong growth in international passenger air travel. And with that quick overview, we can open the line up for questions.

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