GATX Strong on Dividends, Buybacks & Fleet Upgrade

Zacks Equity Research

We recently issued an updated report on GATX Corporation GATX. Notably, the company’s efforts to reward shareholders and upgrade its fleet appear promising.

A glance at GATX’s price performance shows that the company has outperformed  its industry in a year’s time. The stock has gained 11.7% against the industry’s 7.7% decline.

 

Why the Upbeat Price Performance

GATX boasts an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the trailing four quarters. It is a well-known fact that an earnings beat generally leads to stock price appreciation.

The latest earnings beat came in the first quarter of 2019, results of which were declared this April. Fleet utilization was high at the company's Rail North America division, which provided a boost to GATX’s quarterly performance.

Additionally, the company’s initiatives to reward its shareholders through dividends and share buybacks are encouraging. This January, the company raised its quarterly dividend by 4.5% to 46 cents per share. Moreover, the company’s board cleared a new share repurchase authorization of $300 million.

GATX apart, other transportation players like J.B. Hunt Transport Services JBHT, Norfolk Southern NSC and Southwest Airlines LUV raised the respective dividend payouts so far in 2019. The frequent dividend hikes in this sector can be attributed to the current tax law that boosts cash flow owing to huge tax savings. With increased cash flow, companies are frequently engaging in shareholder-friendly activities among other things.

Moreover, GATX's trailing 12-month return on equity (ROE) supports its growth potential. Additionally, this Zacks Rank #2 (Buy) company's efforts to expand its fleet are commendable. In this regard, it is imperative to mention that GATX inked a deal with ECN Capital Corporation in November 2018 to buy up to 3,100 railcars from the latter. 

Other Stocks to Consider

Investors interested in broader Transportation sector may also consider the likes of Air China Ltd. AIRYY, SkyWest, Inc. SKYW and Radiant Logistics RLGT. While Air China sports a Zacks Rank #1 (Strong Buy), SkyWest and Radiant Logistics carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Air China and SkyWest have rallied more than 12% and 35%, respectively, over the past six months. Meanwhile, Radiant Logistics has an encouraging earnings history, having trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average being 37.6%.

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