Earnings call transcript Q1 2023

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Operator

Good morning, ladies and gentlemen and welcome to the GATX 2023 First Quarter Earnings Call.

At this time, all participants are in a listen-only mode and please be advised that this call is being recorded. After the speakers' prepared remarks, there will be a question-and-answer session. [Operator instructions]

And at this time, I'll turn things over to Ms. Investor of Head Hellerman, Relations. Shari ahead. Shari, please go

Shari Hellerman

and thank Thank GATX's joining joined by and and and Vice call. you, Good morning, today CEO President Lyons, Bob. you Bob Ellman, XXXX CFO. am Executive President for I everyone Tom first earnings quarter

will trends forecasts. that today could from statements of or defer our some statement. forward-looking note information you'll materially of Please during Actual hear the discussion consist results or those

and or included For discussed more assumes to refer Form our for in reflect those information, forward-looking release XX-K the risk GATX's circumstances. to in no earnings factors events obligation revise please XXXX. statements or subsequent GATX to any update

provide AM a virtual-only like on will is I quarter scheduled in quick everyone Central first be April held Shareholders' our results, to at XX Time Meeting Before Friday, I'd and XX:XX recap that a meeting of reminder our format. Annual

net Page to or impact earnings income $XX.X diluted due Earlier share. net XXXX other income results included These $X.XX or and XXXX today, tax of share, to compares detailed share respectively first per first our negative quarter first per share. GATX and $X.XX per reported $XX.X million, XXXX million quarter XXXX This from adjustments of to of $X.XX are items. items XX and quarter of $X.XX on per due release. net

Lease Price locking lease for objective positive evidenced in reflecting rate our by environment XX.X%, focused of America, remained in high utilization lease was and rate Rail the strong lengthening at existing railcars rate the fleet briefly attractive on the railcars I'll of for remain North XX.X% segment. renewal as of and rate. remains renewal GATX each The Now success At our change address Index demand terms fleet. quarter. We favourable, XX.X% currently continued for

all we've Additionally, Trinity diverse railcars railcars agreement, agreement. base. supply and our supply to XXXX our a XXXX from place railcars successfully supply with from over X,XXX customer from Greenbrier placed we placed new committed agreements our We've X,XXX continue

Supply In nearly addition, placed we've X,XXX Trinity from our agreement. XXXX railcars

scheduled Our in delivery is earliest our under agreement supply XXXX. available November,

North to operate high maintenance work our our a vast quality cars continue across levels our We'll direct American experienced tank In specialty we while freight our continue of we the is the where our safely safety, workforce shops of network. on to majority cost own and and achieving network, in superior metrics. productivity believe to network

The secondary the generated market million for of for remarketing railcars approximately America quarter. North robust. $XX remains Rail income

opportunities the mentioned over earnings on in As the in also rates. acquired secondary These market. quarter X,XXX with cars and release, in long-term attractive investment the are identified we attractive leases cars

Rail investment demand strong took over railcars the International, and we to was pushing experience very lease of first deliveries renewal quarter we volume success rates for quarter. remained as Rail X,XXX in types. International's At for continue in nearly million $XX cars car most up new

reflecting the Turning expectations, aircraft management, Consistent in share is environment travel. steadily was to air ongoing the driven engine our passenger Rolls-Royce. recovery from operating for spare improving, earnings by joint with with portfolio first affiliates' performance venture our RRPF, RRPF quarter international higher

$X.XX items. quarter first from in with impact tax into line any to share, year earnings full continue excluding very environment, and the With range year, to the much our we expectations the coming expect of adjustments diluted $X.XX other in be per to

to hand so up Bob, concludes it can that our open questions. prepared it remarks. back we And I'll for

Operator

our We'll Justin first [Operator of Long from instructions] morning this take question Stephens.

Justin Long

year? the what some of Shari, in you forward, versus perspective beginning of thoughts? but outlook function relative of expected? maybe the relatively the that, I you timing on with I seems get to the guess It that going the to the love your just morning. this if in terms you line line relatively remarketing fundamental income, mentioned in a was aside, quarter good a quarter, income of you street set from the and performance thought and would is think say mainly like start Thanks was of remarketing what you beat first the I'd at to

Bob Lyons

Good morning, assessment. and that's Justin. Bob fair It's a

As you can volatile income know, be quarter-to-quarter. pretty remarketing

does but -- America, all line very probably bit rail coming that North a move So much international our than business expected. the in Trifleet there Rolls-Royce, anticipated, bit that would much goes XXXX line we a international Rail very little the across around stronger what we we year expected is I is rail quite with progresses. into as what fundamentally and environment in say with

Justin Long

Rolls-Royce, And there north think $XX any remarketing something year it. million we contribution how us And, the before and Is $XX the Bob. of first just you improvement JV you way Got in full management, quarter. that of if I saw that think from in guidance fairly through gave Thanks the the that look expecting to help million on and $XX from first that were at of from income? your JV was on alone to much contribution I to came the million quarter. significant point portfolio

So, there? thoughts updated any

Tom Ellman

I'll Justin, down break that for you. Yeah,

income. So the million million about and remarketing of $XX piece was $XX was that $XX about million operating

already piece Rolls-Royce bit. Bob you remarketing around the JV, noted a moves that confirmed, and As quite in even

that talking to bit to about So expecting continue on that of the been still we've JV. year to couple back we're for in moving that this guidance full things get years trajectory. than a but anticipated, Maybe are we XXXX that XXXX, the while for little we're a quicker really point, timeframe, pre-COVID on at trend change ready levels not

Justin Long

you the rates in how and the lease going last on from quarter. trend saw first Curious Got updated just guess I rate me it. thoughts what absolute trends on is basis on forward? any absolute one sequentially an And, lease

Bob Lyons

types so. and car energy-related most were car up been So, as X.X in freight XX%. improving car were probably get relatively discussing down for X% quarter we've the types flat rates tank past or you freight years. lease steadily this types about you were know, around about When to particular, Most

most But more car it's you around XX% important car to year up types car down types are a year freight context those are a versus freight that are tank ago, those types XX% up to sequentially, in Most or up put and are around that as XX%. even energy-related compare ago.

improving So and harder. remains comparison just more this and on it rates, still a gets quarters and last rate time bit you a of lease we about little quarter, talked goes the environment strong little have a those bit lease more as

So as in everything on first question, our the we're to mentioned very and with this happening trend expectations. not very Bob much totally surprised line see is

Justin Long

time. for helpful. the Very Great. Thanks

Operator

take from Elkott now Thank question next of We'll you. our Cowen. Matt

Matt Elkott

Thank you. morning. Good

Just surprised? strength rail a rate be environment quick is it you and down are is fact a how intermodal follow network given bit X% the down up by surprised the is continued X%, resilient it; to been, lease that time improving. or guys Is X%, the rate fluidity volume on has the lease rail strength in and

in tempering interest more higher So those -- two rates rates would to you near than has by that think lease and headwinds being factors builds? be been offset or term, would the is that

Bob Lyons

to combination -- keep car the the new interest not customers Well, have to it's there. also you alternatives to -- costs a regards as rates. out for in that It's in mind just

of lease the reflection to stated So heightened relatively cars as to on kind go leeway They up in costs up as and continued need and latitude the take levels, new go car need and to that a need of interest for rates they those have rise the rates a car go existing alternative. gives to up. to up new they

interest we what we hold costs, very surprised speaks up fleet in on not of to to on those to holding seen So rates, where terms and last as bifurcated the cars are customers particularly some market utilization, those again, you as years, think to course rates very mentioned, so of existing have and that are the move I car new to a high the couple reflect they're keen in over cars. it the attrition place, overall rising

fortunately is lift renewals. commercial that, have new big and more supply and tank on we Placing under a heavier big side, a that particularly the customer car bit do network to able cars challenging, is agreement, a we're than but but the base a

Bob Lyons

dynamic are supply it types. the and that Matt, side, industry demand Industry starts carloads XX% storage versus that about look And most remains under car cars for up and ago. are and favorable demand X.X% with then year at always if you a

factors some mentioned. So there positive you things offsetting some are of the

Matt Elkott

I and Yes. your kind No, know, you of longer that just XX the know, I only began, one-third years of just question. maybe over term have don't recovery guys rate two lease fleet repriced, makes sense since or a ago. then maybe

your least, at higher lease see a will to more more to happen then will for safe come that given years assume should it couple be is fleet the at So, and of revenue repricing of growth fact we levels?

Bob Lyons

give and express rate bit some reason the positive confidence of the part continuing lease give too I say of for Those as the the to environment as would much strongly little from but get is So, are the we of what that, current environment in getting we a always better away big little XXXX. -- you a straight get guidance you the trends year in we know, comparison and upmarket. beyond trends don't further the and

Tom Ellman

portfolio years the the high terms. fact put right too. of a I'd longer at able into and lot encouraged renewals And dividends a Matt into embedding to return now flow Yes, come. lot to cash attractive at the portfolio that's for quality, at strong or attractive rates very add the by Yeah, pay we're that now we're right that'll of

Matt Elkott

related like I just been and car your I very market slight center then they've but, And the finally market know maybe and Tom, on from types the secondary perspective so and recently on consumer there's slightly very housing secondary being certain cracks think in been so What's strong, environment the valuations? Yes. Bob forth. maybe and some to valuations,

Bob Lyons

market Positive of because rates. most higher some the things we one point we it's expect say mentioned to and the we be fleet would I from continue. feelings impacts negative always car industry. remains to any interesting strong the the secondary about individual the appear the upsetting have is you to interest that And market of that in So, types diverse

less of attractive, might relatively going if there's our be always a to be fleet that's piece that's even So pockets where true. there

Tom Ellman

mentioned Shari had too, we on in point very the buy a the to secondary market. And, that is on in the a follow comments strong side opening quarter Matt,

in Tom selectively can One point of the recent strongest that goes to again, can years, recall the mentioned, we opportunities. that and I identify

X,XXX we other individually lot some cars quarter, to first will we've really portfolios in a basis the for bought secondary a bid seen in a add want market. see that car in opportunities we leasing fleet attractive types we very the car the on the we companies, and that targeted sale evidence When from north as of of to

Matt Elkott

Now, that good that's secondary of see opportunity pretty to seeing pockets market. in you're expensive a still

into guys be an you high, that a any now, market imagine because look needs selling in might think valuations future, debt you look targets? get this acquisition of exit before time to to to do probably are refinancing wouldn’t to you some kind bigger I lessor want Now, if there happens. have you want if the and out is if right into that that you're opportune the

go could for we sale? fleets larger So see

Bob Lyons

always the portfolios and there into those well out of owners We're the It's Matt. are of a most possibility, portfolios. dialled that

are in the stay happening what's market. to trying we abreast of So

the think possibility opportunities. a in of always and we'll we'll it's look, I will always in those be So -- always mix we terms

the now core banks, to in seen we the But loose? portfolios where pressures industry that question it the we've those those there Certainly are the bank. possibility, that of a portfolios to sector, haven't it banking had And are by portfolios relates yet, might as of some owned also some aren't given right shake

Matt Elkott

would at those you right? you a bid fleets, those joining interested -- in for would But ask in be --

Bob Lyons

It poor quality down the those all evaluation, two comes the to and portfolio of things.

Matt Elkott

Shari, Tom, Bob, it. you very sense. makes thank Yes, much. Appreciate

XXXX Operator[Author Tue IDX: XX:XX:XX Apr at XX

]

Wells next Fargo. Allison at We now to go Poliniak you. Thank

Allison Poliniak

seemed than more of it morning. talk about higher we bit there? like a you sequential a uplift in a little would -- were just we anything I It there a unusual good quarter. be were lift bit expense? Thanks. year-on-year, but the expecting. Is up Hi, guys maintenance seemed first know Could it thinking

Bob Lyons

is in mix our of and about but the quarter-to-quarter the is challenging. that is Calling of repairs. come with to going expense come everything else. $X that you very Yes, year in The primarily as mix is it's the mentioned, that is like in variance line maintenance exactly repairs those so higher volume to the much million, expectation, due to just from way and volume prior going -- up

full be $X that million to maintenance and we range. the So that continue million will versus we year, believe year expense the net $XX full for really XXXX on focus to up

Allison Poliniak

the I incremental know very And it. dropped strong Anything terms is pockets then, rate overly of being are that you probably in this needs tad. see are changing? customer at a renewal starting the Got it's some picky, but you but point? market, maybe still a this see to success

Bob Lyons

line don't look not and a quarter. expectations. going on if at at we rate, Yes, quarter that with utilization anything on where of single in very myself, context, with pretty read into we year to repeat this a lease historical number really strong are is, but the the Again, look you the even whole again, what's kind much is trends and

Operator

at Susquehanna. go We Majors next you. Bascome now to Thank

Bascome Majors

a being a versus is, outlook of that volumes, as one's a don't in by certainly which more power what more from we concentrated the of bit and have that, to. guess you structural exposure bit you I ton the cyclical the lease intermodal, your we railroad here muted mean Can maybe forward quarters, -- the from pricing drivers little few class next talk about albeit by the to railroad look

next, strategy forward just, those impacts power pricing little of look four your of your how three, come excess market the interest reducing you over car a high strong high But together can prices, bit you. being rates, view quarters? from two, Thank quite how supply, about a the and talk you combination in your that as asset

Bob Lyons

side. side over on the I'll and been has couple that's has network, general in rates years Sure supply we've American Bascome, it course driven fleet of more one been the the the as start -- and about and the been the by really talked as last recovery North has there demand attrition across than that

cars seen utilization primary the price the the and rate So, counts driver to up, of come has fleet total as that along down, new we've rates interest go with lift. been

welcome more What economic carload shifting be and growth, the product the improve. about a we other haven't and is couple seen coming just One, customers we certainly areas. potentially service and truck by from from growth think levels activity moving being material would and from and hopefully that carload rail

from by to they would is believe the freight We all hear there our time, improved. We levels go customers truck on rail. sidelines service the can if that that that more rail from move

pent-up demand some there. there's think we So

and today to to been I in well. it in of would again, things So kicking side as date, break side kind so the supply a of slice looking forward It's far into demand two recovery we're it levels.

Bascome Majors

that. for all you for me. That's Thank

Operator

Thank now you. Sidoti. We'll McCarthy Brendan next at to go

Brendan McCarthy

actually you. Hi, answered been yes, already question has now. my Thank just

Operator

to Justin now next go Bergner Gabelli at We'll Funds.

Justin Bergner

maybe touch that And you within American what EPS driver I guidance, think hear rail be would I correctly? you heard if that be a your the to mention Did expect I so, unchanged there? North better.

Bob Lyons

being more fundamentally being The kind little Europe, America, than we a of it's fundamental. little anticipated performing that's bit businesses better as planned. of kind and more bit, RRPF whether reference North the rail and rail of India maybe Trifleet we a all Rolls-Royce rest Actually, or

Justin Bergner

would you. sort $XX number the the that Thank And on Okay. quarter, of asset for sales non-gains Tom I that be guess on side million-ish

Bob Lyons

Right. Correct.

business. of the base looking kind Just at

Justin Bergner

Okay.

lease first during in quarter as improving as first -- impacting Is came constrain the think out to, any and is to of of came I it we the first starting sequentially? out the that quarter. how seeing some of whole if rates Are them not productivity of the spoke you way? rails sort that we

Tom Ellman

shippers, action, the happen. haven't mile. encouraged bit I if service. that levels of term improvements say of to of see by talking would service sustained like Most we probably from to the sceptical but seen last particularly and would improvement most talked but remain rail a the near more points the mentioned, Bob by that the on make about ship to mile they to shippers they're more like rail would in little as first so Yeah, improved, some the railroads,

Justin Bergner

the of a line. increase likely we Is there of other aware expense to sort Okay. lastly, the that on that? That's the income in Is year-on-year sequential And segment be other and mostly of their that's that was then there helpful. driving profitability continue? anything

Bob Lyons

Yeah.

other part includes other any of that aren't segment Trifleet of So both that -- and items any part true segment. other the any

was in to over Trifleet and up rates. that's some and bit. up million So a was -- due It little and that's lease improvements little utilization rough a basically $X.X

interest about the do. that segments the So to it two we on One various other, We that from majority different million based was each other, of our is allocation that's true and the things. target and allocate a in or slight you it. do can piece leverage. over allocation that that, under this and And income their other case with end when in goes gets interest we up remainder the with $X associated

it at at that of part assets. When direction. on that, pension you other interest looking When net The return you're again pension looking you you're either expected and pension at expense accounting, is go look accounting. can do

So together direction. particular those about I little can positive. a go a not is million something trend occur That would over it of are look because for $X any to things that

Justin Bergner

Okay. for clarifying and Thanks quarter. next

Operator

a Majors. from take follow-up question We'll Bascome now

Bascome Majors

here. for follow-up taking thanks the Yeah,

of about think do and books the as North more you. sit on the be concentrated out, feels As the gains mid-year get raise give Thank American you QX, what going in the into could we of there's forward? to drivers of that, upward like cadence, most Can QX, the to where modelling likely about and the if sale, you lumpiness we from whether will specifically, momentum guidance. today if look to sort the you visibility we it comfort you have to an talk any

Bob Lyons

Yeah.

to of the a material to as market lumpiness. upside focus a really tend exercise, just to purely likely provide long-term our because of scale item the show guidance what to rates, But we business the lease relate and most the what's see Bascome, nature and expectation those of financial would with secondary the that would or does mathematical up downside activities due any there on kind results. statistic in what's the up it with going variance on utilization, to is operating before show in going on we So from

performing mentioned and to statistics the expectations all to is in strong a as reasons several the of those Calling to we've with it the market, or call, we repeatedly that, really that for said given. do noted that, are relates on be we line times we challenging Having specifically half to continue secondary on expect don't operating cadence try it. we've as timing and very

Operator

Hellerman, Ms. morning. no And back further we I'll conference it the appears this have you. turn questions to

Shari Hellerman

I'd their call thank contact Please like with everyone this Thank on participation questions. for you. to the any me morning. follow-up

Operator

morning's Thank call. XXXX ladies you, and you Again, will GATX We'd gentlemen, day. for this quarter Hellerman. Ms. thank great like conclude you all so wish a first that to and much us earnings all joining

GATX (GATX) 25 Apr 232023 Q1 Earnings call transcript