GATX (GATX) 25 Jul 232023 Q2 Earnings call transcript

Hello and welcome to the GATX 2023 Second Quarter Earnings Call. [Operator Instructions] I will now turn the conference over to Shari Hellerman, Head of Investor Relations. Please go ahead.

Thank you, Sarah. Good morning and thank you for joining GATX's 2023 second quarter earnings call. North Bob and and Executive CFO; and of by Executive Tom Vice today President President Vice and Rail joined Lyons, CEO; President Ellman, President I'm America. Paul Titterton,

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

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

implied other quarter $XX.X share adjustments net XXXX per a adjustments $X.X million items. net Earlier reported second XXXX second today, $X.X share. from $X.XX net or positive impact $X.XX million and diluted from per income of GATX XXXX include compares results of tax negative or results $X.XX diluted second share per items. This other diluted quarter or second The or income diluted $X $XX.X share. a per The impact and of quarter tax million quarter million of XXXX to

of detailed year-to-date $XX.X other items. other and share XX XXXX million items tax diluted diluted Year-to-date for and results per negative impact $X.XX impact $XXX.X or XXXX, These a $X.XX from results share. adjustments net a in $X.X tax year-to-date million items. include same million Page The our net from XXXX. $XX.X of This share or are period per $X.XX income or to net include the per compares share per $X.XX release. diluted negative was of earnings or on adjustments diluted The million XXXX

continued and North renewal the briefly America's I'll is fleet demand end fleet in rate at high utilization for segment. America. XX.X% North reflective existing success was at of quarter strong which our Rail remained XX.X% our each Now, address

was a Relations we index LPI announcement quarter are lease Investor renewal the change LPI XX month, The the renewal data an average to rate of GATX's positive term a announced with the modification XX.X% GATX on historical on available this website. The basis comparable price of and calculation. for Earlier months.

to customer railcars with agreements successfully committed We from our place a continue new base. supply diverse

placed have railcars Trinity our supply supply agreement. and our XXXX Greenbrier X,XXX X,XXX placed agreement railcars We all our from XXXX we've from

In from railcars addition, our Trinity nearly we X,XXX agreement. supply XXXX placed

in Our earliest scheduled the our XXXX. available supply is quarter delivery under of agreements first

$XX.X million North for of market quarter the remains was Rail the active. and Consistent fleet to utilization with America second the our Rail perform expectations, in income We secondary million Europe's railcars well. XX.X% end of at The in year-to-date. continues $XX.X generated remarketing quarter. International

the Europe remain in of and experience many rates sector continue India car for types. intermodal to at success the weakening we some types and in demand Despite for majority in up railcar Europe, pushing strong lease renewal

Additionally, Rail of second cars total $XXX volume million. X,XXX International's we combined and a the continue investment was Europe to delivery during cars India, adding nearly quarter. new in of over Year-to-date, take

portfolio Turning management. to

at performance demand the Rolls-Royce travel. air international RRPF affiliates. improve for operating a for by The the environment to driven primarily in to recovery solid Partners were due results broad-based & quarter Second Finance continues

X engine leasing aircraft In owned and wholly addition, million during on quarter for capitalized opportunities we the $XXX our attractive added engines to portfolio. spare

$XXX $XXX over for million million and second total GATX's Overall, investment over year-to-date. the quarter volume was

earnings our items. tax by Variability and mostly guidance the of also reflecting activities upper share, any noted other excluding in XXXX $X.XX to adjustments remarks. from our full range driven the remarketing to timing release, will year-to-date and we of of or previously diluted announced guidance this $X.XX around year we the in outlook of the as Finally, modestly for year, be the remainder and end exceed per expect impact be performance the prepared

I'll hand it open it for questions. can back operator we up so the to

Instructions]. [Operator

with line question Allison first the of from comes Poliniak Fargo. Wells Your

to on the talk hearing you very can any softer? have Is about the customers? and perspective Would against -- seems very, you us your think? an having there what specific going around continue Is give that it to mean to concern Any this fleet just you be is from I not to happens economic in side. lease if we're that? that capacity It strong. Just fundamentals you remain that inflection thoughts

This What for to the Titterton that our holding the continue they speaking. Thanks question. Paul be to I'll for is they interested answer in that that, have. customers, right would Yes. is on Sure. we now Allison. say cars

the that think that we've generally tightness reasons production car seen. of despite has we've also new fleet that example, velocity the macro includes rail scrapping higher that We've the included trends things the remain for to talked and perhaps like, includes the fact result limited that's more some of of for some alluding you're seen speaking, it's the about relatively the I tight. that

So the to railcar the continued equation supply has fairly North in tight of American fleet. the side be

of have customers, their about of even they seen cars. though result uncertainty may that, businesses to want a macro As degree hold on we have some to

And that's a factor performance of in the big so existing the been fleet.

at the expense a terms any and color fleet. Just Is then going unusual of still, QX the And that into far maintenance mix? bit so Great, Anything programmatic? from it even that's for seems least little QX. on in there helpful. elevated maintenance

drivers few a are there. There Sure.

the some work. last that cost volume speaking, repair due that saw a additional costs pull And that's the X a will some cost internal. shop we're one more come seeing to as is X we then higher of just railroad and has seeing of forms. So remain. gains last of maintenance X is our than higher over variety assignment What the of though, of There's the in reasons, none higher we events no cost that of internally. AAR of really but made to year. going volume And than is repairs contract higher I forward in the inflation of structure should compliance, years as say, structural a the that There's well inflation driven well, option as events X and a sort some there's fact impact we're of driver which offset of has also some our use network increased more generally

really, this So involving is just this in phenomenon year. volume we're seeing a the

terms to our continue be We maintenance costs. very confident long-term in advantage about our of structural

of Long Your from Stephens. next comes line question Justin the with

trend as was half? the a progression the you're second back I on lease the color the in that expecting rates then basis move And for into on you could what in you sequential any if absolute saw wondering share we of rates quarter?

generally was this I now, say in very, what very low Yes, And single sequential Paul -- is, speaking, fleet, across is again. the Okay. production The right will rates progression, digits. the remain strong.

rates So we would lot basis see continue answered of to to fleet as on types absolute near alluded say the most Allison's the an again, at moderated. But right question, remains I I acceleration And I or all-time now, when a car we've that seen for earlier has highs. tight.

point, more outcome most So I likely have the term. short the story medium the same is of this at in to to say would

up engines Rolls-Royce outside And could many in just get maybe volume be and owned how have pace Got management on wholly engines in longer-term we the owned aircraft to you strategy talk that portfolio terms saw the wondering growth today about us it. you the could if investing especially you And about quarter, your in in going and segment magnitude of investment I we was given wholly speed JV. forward? of of could the just the thinking

Yes.

investment the we the Justin, X then here regards quarter. this is the third and bought in Bob. owned management, second I can what And to wholly volume the quarter you and additional tell portfolio in closed on X with we engines

So for roughly year million. total so engines XX far $XXX this

For of XXXX, bulk that's it. the

is owned. we to Our this largely our roles -- schedules, delivery on directly that ability expectation we here have for flexibility based direct. like on is what the investment have invest you, completed the the What about the have we of year

in like XX-plus the We capacity to class. been asset have We Obviously, for it. years. it we've the

year. invest and million joint directly So million be year. $XXX we through somewhere million done the RRPF $X to in this also They've to range would them about can through volume we this We the can $XXX of of investment invest venture. expect

really whether it and -- a is more really decision it's line are the bit invest sense needs on roles in production to the what opportunistic makes through So their or engine of directly. venture terms joint

flexibility the have to We either. do

direct We'd somewhere investments, that can that something like $XXX no issue do and GATX's million that would with directly basis but to. range an to in somewhere portfolio continue terms is to grow to like annual million in of $XXX range we on in the --

And owned. of as had in sizing more we July. we we for wholly X as that where today, just XX Justin, Bob And June early engines XX, mentioned, are

the XX quarter. of at So XX but the end

think, north in that's amount, of million, total yes, I dollar just direct. $XXX

the of comes line Matt question Cowen. with Your next Elkott from TD

Paul, quick first. just follow-up a

You mentioned inflation. highs, highs. railcar in related underlying near not lease several are to that's near type We're all-time rates conditions obviously part, demand are all-time saying

while used the we've recovery is -- we've a mean, in a for I phrase Yes. said is this that supply-led railcar the market.

saw really it's availability real This the tight the recent saw, high that supply. And rates It's recently was it's and seen So of the boom, very really all we prices sense that new new sand the we the crude to it when the than the -- higher myself, seen is boom. scrap we've velocity. repeat and past little different steel demand ethanol of we've pricing a driven. factors tightness railcar about bit today. cars cycles is cycles the was have car saw then it's again, just We particularly up boom, been frac than in market this

the contributed view seeing really market we're lease we that's and the So have. that the what's underpinning really, supply factors those have that's risk tight at least to

to demand a case. and carload we've to seen past, haven't forward your growth that the as being in that point, has Yes. driver look been supporting today. not we And certainly mentioned But the really too, here

hearing Yes. back transcript. I railcar And don't any have know go talk if and their the auto tightness their you We'll guys to firsthand in before you happy customers? other or ever to rack types would Can about morning. well on that this your from resilient as know complain as about your railcars you're that exposure calls. on GM seeing call mentioned they've car shortages be check

we carriers will participant Matt, demand I general, is significant we because, say, investment in into we specific have new multilevel types. obviously, in fleet. car in say a the get don't there have diversified and I'll been there a So auto

to you So we're market as participate investor. can in going demand, an expect where there's a significant that

parties to for there out try multilevel that's So -- of and an are you're think carriers. demand right, auto to I area that's a the where certainly, investing number meet

balance of demand other broadly Beyond that, just again, service, example, perennial fleets seeing specific I get we say than to small really cubes don't terms say than other to across and the now, for would most into for the parts like right strength sand of like, fleet. in speaking the we're laggards supply

Got then on hold to any hold Or same to high? on that up X rates it. so And X shippers' are secondary they continuing there being in lease Are the have secondary there to market. to strong. just supply valuations? also rates easing interest forces contributing you as same forces, seen desire assets are the last Are market

remained So I sellers to valuations you you quite in tell But going and sell. why demand why the or buy will I'll say have that not tell because I speculate strong. can't I'm this, what is secondary on buyers market ultimately,

rates in of in in to ready other terms a we see of So buyers secondary interest in of market. the continue spite market headwinds, spite

And paring we rising we the with possibility That thought would rates, into you year, the there interest has a if been some not buyer recall, back case. we the came Matt, think at I among least actually Yes. see as was universe.

to even But advantage it that secondary or the continued, as I of naturally market of opportunities imagine so. diminish fascinating. would the that you've though taken in past Yes, the over has advantage your full strength nearly years take X.X

terms in in we've extremely X for of to had through year, and but in had larger be the buying we've the how biggest we the Well, first avenues one one the as actually, of that to months execute the there us of -- years We've of secondary well. we've are finding market. done selective cars had we channels

add again. I'll speaking this is And Paul too,

to great we On the deal high-quality originate side, continued business. of a have sell

say, continue see the opportunities to still the not dry do So in all. I to side, as exhausting would we to case We so on of bit at sell that's of the ultimately terms opportunity a sell attractively. and have quite when powder

Susquehanna. with comes Your Majors Bascome from line of next question the

in between market market see timing America. half on might North that, Just last sense magnitude you on the of to year books impact the XQ? the the print from the and any in the XQ and when clarify of P&L you question that secondary second we Do have of the and

Bascome. year. transactions, know, lease But It's with the half the always a normally lot difficult a that of this is a to book in go We the of market lot lot do car tell, to year. types, as different itself second book of do different of different you comprised may of We'll riders. a

of and And of so terms on the whole into little how the individual on that in And buyer and hold bid process can car. approval evaluate they lease closing selling you selectively bit that universe, of can we takes through a of potential the and go timing verse. all bid the get that's to transactions. then It they And time. the or

takes it remains what it's everything of can in is, you on brings the market time; year. tell package of bit I see robust. to And second we a hard half the the based little here What So see, we'll predict. pretty the

side that perspective? coming I'm years? years some X environment X this has seem just the larger X to curious a buyer the if opportunities been the last not fleet X may or from present particularly a over may haven't next that, just On portfolios from you trade, large the or of as or that change see up over buy

X for larger there and the activity Well, in the of side time loose. come mid- some coming might perpetually thought, beginning like passes happen. with, the this rail always embedded banking part the of smaller even or opportunity all with portfolio doesn't industry, seems well, the some the And saying, on we're to with year of it I year example, in think turmoil the it is should then there's there be over it and some of sized we maybe banks an portfolio

We haven't seen that.

they a time will Probably happen? history would might takes than they say it anticipate. should So one lot more

for I looking your just you're in put you was period it's earlier last period I an this GATX last to over and repeat years unlikely quarterly question and position just by North time was average since now. in maybe Bonanza over early that's this crude rail the questions, bookends mid-XXXX. America about from that X-year analogous that And a the out in talked really years? the not GATX? And still rates mean back LPI me, to you to next the realize what And locking fast as type were tank feels first similar the rail stats favorable with for as And earlier what over I been feels bigger opportunities It's that But for your that XXXX. time look today. world you cycle. back, a step of to backdrop sequentially. X the to different you car X But the they but rising absolute there XX%. picture the They're at one renewal terms X of if look as lease as out

of a may right? that And be But they stair to more feels a I about North similar confident business bit a feel position of Well, markets great terms and opportunities little of continue and grow the to in come opportunities. in and enthusiastic highly is in Europe all does, on just great capitalize. position a consistently, those way. we don't both that what say are we There's our in capitalize in we're is the We come and positions America, India. would in platforms rail to going anything step to our have, very

that few has high about very been good to leasing some an excellent very markets business in It that we're grow. perspective. digits our continue other addition that. feel is to unit GATX from the organically can -- container the business Trifleet about bought fact tank ago, I So we that feel we in of years unlike growing the single our a I also good a

grow are So our Rolls-Royce the when opportunities. anticipated continue through are And investment is about can situation. And good substantial business, literally we've air engine I out to direct, with would partner pandemic of that that. that you, mean could asset third we whether here mention that class I And joint a global through in travel with. there'll tell on feel coming be have very Rolls-Royce value, can leasing the to thing nobody come given X. have have went And venture yet assets there. themselves stores we that or great The outstanding there I great resiliency. showed opportunities an we it's the we fact

assessment general Paul if I'll with you have in terms rail, add American to to that's dynamics. see my anything regards and the to So North look of

I are not which to in very Yes. much Bob. said, market now it's as terms right fundamentally, mean we us I pricing been mean, a I tight and in you. term. add, Thank for has of good

capital I successful prices, high think even American this attractive asset finding places year so some in we've North to been deploy far despite Rail.

where good do, we as the fundamentally, we predict we can't So about feel market And are now. right positioned the always future. we in

So against the observed, we might terming uncertainty key our face. that hedge fleet, you out as of is the the

good feel overall, North have positioning think Rail America. the I So about we in we

add something on oil going on only mentioned that, in is going difference that that key right now. covered We -- don't have on was that the thing Bascome, analogous there cube hoppers. you to is small up knew We was the during in there And we cars. cycle I'd knew going crude like that overbuilding overbuilding

comes question with of Gabelli Funds. Your the Justin next from Bergner line

be would Rolls-Royce joint question on the First venture.

of in you Could leasing operation higher the remarketing of sort segregated sort the year-on-year was how maybe versus increase sometimes operating the fleet. on past income segment profit maybe think from or comment you've of that? the the much quarters, coming I in of

Certainly.

So remarketing. year-to-date of are that for earnings operations XX% from from we numbers and have, XX% segment the about the about

Okay, I'm a on got other to that's not few above end late, drivers sure minutes should million on million driver of? the covered material so of Or at $XXX high the early remarketing but the the are guidance helpful. income? there, aware Is or I this we be there to raised was $XXX the higher guide. if primary

Yes.

the positive into the and he in that Rolls-Royce. look And primarily, about operations higher-than-expected the first and on much America segment proceeding tying segment one year. really segment, you primarily North clearly we news as in performance side first shops. Paul's The the if answer, segment venture performance things revenue seen that the coming anticipated overperformed at seeing -- some some that's coming has into to portfolio to activity We about pretty Rail So positive as your that we've is remarketing and the well. the are talked in question, due by we're maintenance talked volume of in better-than-expected joint by our back driven side on with management income offsetting

that's that's different. the biggest one been So

now pre-pandemic XX% been And the now that airport air of that. pre-pandemic into pre-pandemic relatively exceeded out anticipating test to most recent and lately, think we I'd at Justin, as slower recovery and statistics who's I of else. were I the year, the still coming the air 'XX, international already has came can half travel say, show But domestic of Yes, travel and is back levels. has think travel that is levels. back Anyone levels We we in occurred. to everybody global

So that faster has we thought. recovery occurred than

Got you.

view XQ? Rail guide sort that didn't you on first sort I guess I the of XQ but America the So isn't remarketing realize quarter versus are higher in of your North income suggesting post post increase then materially you in

correct. That's

Okay, got quick Two you. questions. more

-- signs step are any things a the of to side, step Velocity sort continue the you change seeing Or there? struggle at railroads? major On positive of

velocity, now, would and when service the mile last a be It's in will we overall the quality. what really there's shippers. rail period, particular and really would railroad would a And about competitiveness of mixed, see sort say different those the velocity, talk there's rail say mile, a the of a say, And we would there trend mix railroad be that first I story. for the say things up what down. remains can't we at then X dwell collectively overall different industry right I The story service time also by will different -- improvement service package being impacts railroads. in across the any is offered are I it

a And And big Okay. then as what occurred, have any for months. as major of in there to and suddenly orders do maybe lower suppliers thoughts curious that why effect had it set if any might tightness that new railcars to the in the one prices and orders of was of the got on to in. lastly, just if I the that recent you means prices have steel could lower if steel relates industry railcars lead leasing cycle

ultimately, the what book individual really It's and to because drives of hard specific to builder may the an customers say given a just niches be they're orders for filling.

driven really know. I might what have orders. really for difficult speculate those don't to on us want I -- to It's So

And your Stephens. line of Justin with from the question Long comes final

X was the I to color and provide in quarters. thinking railcar if And driving bit that that back couple circle on stepped last forward? market rate little I about sequentially could fleet wondering more that around you European going how in just data down over the utilization the a point wanted on you're utilization of what's

still I the stable pretty up Justin. market. we're say across seeing Bob. well most intermodal for Sure, has been is This car extremely broadly has challenge types. held spot and in utilization would demand The the fleet,

economic growth that has just some wagons spot Europe. utilization. And negative The in overall. flat has benign, been the been of have has that pretty expectations that down under primary been the circles, We intermodal X,XXX in driver Eurozone step in

is for intermodal the the So on for or demand low. carload side environment carload

is the driver. that So biggest

drive demand investments type. particular long-term need those be of car there. the like through this now we assets. period great We made They'll right like for to Now low we holds for that we've but us

Shari time. will further Hellerman. this turn to are call the I no There at questions

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

call. conference today's concludes This

You may now disconnect.