GATX : First Quarter 2026 Earnings Call Transcript

Published: 2026-05-11 13:49:06 ET GATX

Published on 05/11/2026 at 01:49 pm EDT

Hello. Thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the GATX 2026 First-Quarter Earnings Call. (Operator Instructions) I would now like to turn the call over to Shari Hellerman, Head of Investor Relations. Shari, please go ahead.

Thank you, Tiffany. Good morning, thank you for joining GATX Corporation's 2026 First-Quarter Earnings Conference Call. I'm joined today by Bob Lyons, President and Chief Executive Officer; Tom Ellman, Executive Vice President and Chief Financial Officer; and Paul Titterton, Executive Vice President and President of Rail North America.

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 2025 and our other filings with the SEC. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

Earlier today, GATX reported 2026 first-quarter diluted earnings per share of $2.35. This compares to 2025 first-quarter diluted earnings per share of $2.15. I'll briefly address each of our business segments. After that, we'll open the call up for questions.

Despite heightened macroeconomic uncertainty, our businesses delivered results in line with expectations in the first quarter. At Rail North America, demand for railcars in the existing fleet remained steady. As noted in the earnings release, starting this quarter, Rail North America metrics and statistics reflect the combined legacy fleet and the Wells Fargo fleet. At the end of the first quarter, Rail North America's fleet utilization was 98.1%. This was consistent with our expectations given the inclusion of the

Wells Fargo fleet, which was at 96.5% utilization entering 2026.

Renewal activity remained strong. The renewal success rate was 79.1%, and we continue to achieve lease rate increases while extending terms. The renewal rate change of GATX's Lease Price Index was 22.3%, and the average renewal term was 56 months. With a little over two-thirds of the combined fleet re-priced in the current favorable lease rate environment, we see meaningful runway to enhance financial performance across the remaining fleet.

We continue to successfully place new railcars from our committed supply agreement with a diverse customer base. Through the first quarter, we've placed over 8,400 railcars from our 2022 Trinity Supply Agreement. Our earliest available scheduled delivery under the Supply Agreement is in the fourth quarter of 2026. Additionally, supported by a robust secondary market, we generated about $50 million in gains on asset dispositions in the quarter.

At Rail International, railcar demand in Europe remained steady despite ongoing macroeconomic pressure in the region. Fleet utilization at the end of the first quarter was 94.7%, unchanged from the prior quarter.

In India, policy support and economic growth continue to drive strong demand for railcars. GATX Rail India's fleet utilization remained at 100% at quarter end.

Within Engine Leasing, our joint venture with Rolls-Royce and our wholly owned engine portfolio produced excellent operating results in the quarter. Lower earnings at RRPF compared to the prior year quarter were driven by the timing of remarketing activity, which as we've discussed, can be lumpy from quarter to quarter. Demand for aircraft spare engines remains strong, supported by resilient global passenger air travel, though we continue to closely monitor the evolving geopolitical environment and its potential impact on air travel trends.

With that quick overview, we can open the line up for questions.

QUESTION AND ANSWER

(Operator Instructions) Your first question comes from the line of Andrzej Tomczyk with Goldman Sachs. Please go ahead.

Awesome. Thanks, operator, and morning, everyone. Thanks for taking my questions. Was just curious starting off with the integration of the Wells Fargo fleet and the recent deal. Just wanted to dig a little deeper on how integration is going there; if you're able to share any milestones or updates there. Then, just a reminder on how we should think about synergies in 2026 and 2027.

Sure, Andrzej. It's Bob Lyons. I'll take that one to begin with. First of all, the integration is going very well, probably ahead of where we anticipated we would be today. As we noted back in January, we did the cut-over of all of the fleet data in one step on January 1st. That was a major undertaking, and it was very successful.

We've onboarded a number of new employees, many from Wells Fargo. We're thrilled to have them here with us. The original headcount numbers that we laid out and the expectations for that incremental SG&A are all in line.

From a customer perspective, the reaction has been very positive. Anytime there's a change of this magnitude, there's always things to work through, like contract structures and billing and cash distributions, et cetera. We're addressing issues as they come up, but there's been zero surprises.

On top of that, we've added about 300 new accounts through the acquisition -- new customers, bringing our total customer base to well over 1,000. Many of those are companies we've done business with before in the past, so we know who they are, and they're all in industries that we know really well, so the learning curve was not very steep. By and large,

the largest customers in the portfolio are names that we know very well.

As I laid out in terms of -- back in January, the full-year impact of the joint venture would be somewhere in the $0.20-$0.30 range, and we're certainly on target for that.

Great, thanks. As a follow-up, do you believe there will be more consolidation in the leasing space sort of over the medium term, or is it sort of the case that most of the major players are set in a good place at this point? Maybe just broadly how you're assessing competition in the space and how that shows up in bidding activity of late, whether that's on the buy or sell side.

I wouldn't really want to speculate on other potential transactions in the marketplace or consolidation in the marketplace -- that's a bit difficult for us to predict. Given the size and scale we're at today, we're really focused on making sure we maximize the returns on our portfolio. Competitive landscape, it's a competitive market; that's not going to change. There's a number of big, full-scale lessors that we compete with on a regular basis.

There's a far lengthier list of institutions that have fleets in the sub-100,000, sub-50,000 car range that are extremely active in the marketplace. We see them often when we compete for transactions in the secondary market, other portfolios that get offered, and they're very active buyers of GATX's assets. We saw that in this quarter, and we expect to see it through the full year where that secondary market is incredibly robust. Capital continues to flow into this market. A lot of people recognize the value proposition that owning railcars presents, and so we're seeing a lot of activity and a lot of interest in our secondary market offerings.

Understood. Just in terms of the overall GATX North America consolidated fleet now, where do you see that overall fleet in sort of 3 to 5 years

from now? If you could share how you're thinking about adds versus selling or scrapping of the fleet over the near- to medium-term. 'Cause I know historically you sort of balanced out your fleet between what you add and sell over a given period. Sort of just wondering if we should think the same way going forward, if it's largely flattish for the foreseeable future.

Yeah, just from normal fleet activity, I would say that's a fair assumption right now. Obviously, if we see opportunities to buy additional railcars in the secondary market or direct new cars, we'll do that. And same on the sell side -- as we're always looking, what's the best way to generate the most attractive return for our shareholders and optimize our portfolio. We're always going to look at sell opportunities. But from a kind of forecasting, budgeting standpoint, I'd start in the same place we do, which is kind of keeping the fleet generally in the same car count where we're at today.

Got it. Then just one more for me on leasing. One of your peers recently indicated that they believe the market value of their fleet is 35% to 45% above its book value. I was just curious if GATX has assessed that same metric in terms of market value versus -- the market value of your lease fleet relative to the book. I know you have the engine leasing as well, so maybe you possibly break those out. However you guys think about it. Was just curious if you had any thoughts there.

Andrzej, this is Tom Ellman. What I'll tell you is, obviously, we're very active in the secondary market in both the North American rail market and the aircraft engine leasing market. You can see from the consistent returns that we deliver. If you look over the last decade, we've averaged over $70 million a year in gain on sale of assets. Clearly, there's a lot of value there. A theoretical quantification probably doesn't provide a ton of value since we see it in a very practical way when we receive actual cash for the assets we sell.

Yeah, I would just add to that, too -- I mentioned previously that there's a lot of capital that over the course of the last 10 or 15 years has come into the railcar leasing space. We continue to see it. It's -- while we have to deal with that from a competitive standpoint from time to time, we understand the logic. These assets are tremendous stores of value. They generate outstanding cash flow, very high-quality cash flow over very long periods of time. They're attractive assets to own for a lot of different types of institutions. Yeah, we do think about that, and we try to optimize that when we're both buying as -- in the most disciplined manner we can and then also optimizing the fleet and taking those opportunities to sell assets to others.

Understood, thanks for the color. Just last for me, shifting once to Engine Leasing. Was just curious are there any incremental thoughts related to the airline industry capacity impacts into your engine leasing business with Spirit now going away? Also, just broadly in the geopolitical and elevated commodity price environment, if that's impacting lease rates at all. I just think the engine leasing affiliates was down year over year, as you mentioned. Curious what drove that and if you expect engine leasing to the affiliates to be back to year-over-year growth here in the near term. Thanks.

Yeah, Andrzej, I'll start with the back half of your question first and then come back to the front half. Income from operations in the Engine Leasing business was actually up year over year, and that was due to more engines on lease at higher lease rates.

As you know -- as those of you who have followed us for a while now -- remarketing income in the Engine Leasing business can be very lumpy. Indeed, it was very lumpy in the first quarter. The remarketing income as a percent of earnings from the joint venture was less than 10% in the first quarter. Over the last couple of years, it's been about 1/3 of our total

earnings, and indeed, last year it was around 1/3. If you looked at quarter-to-quarter variations -- last time, it was between about 15% on the low end and almost 70% on the high end. It can move quite a bit quarter to quarter. We expect when the year is over, it will be generally consistent with what we've seen historically.

The first quarter, the driver of what was a little bit lower quarter than we've seen the last two was less remarketing income. I want to be very clear that that is unrelated to what's going on in the world right now. It's still a very strong market for remarketing of that asset class. We just expect that that first quarter is normal variation in what is historically very lumpy.

As far as the first part of your question, as I mentioned -- through the first quarter, the business performed very well. Continue to be strong supply demand dynamics in the industry. A lot of demand for our engines, and we expect that to continue going forward. Having said that, obviously, there's a lot going on in the world right now, and we'll continue to watch and monitor the situation.

Yeah, if you look at the income contribution from RRPF from the joint venture, over the course of the last many years and try to identify a pattern quarter to quarter in earnings, you would find there is no pattern. It can move pretty dramatically each quarter. At the beginning of the year, I said we expected segment profit in Engine Leasing to be in the

$180 million to $185 million range, which was up from 2025; we still expect that.

Thanks, Bob and Tom. Appreciate the time and thoughts this morning.

Your next question comes from the line of Ben Mohr with Citigroup. Please go ahead.

Hi, morning. Thanks for taking my questions. Congrats on the beat. I wanted to ask for some clarification on your NCI that looks like it's additive, that it was subtracting a net loss. Presumably, this is the amount left out going to Brookfield. Just wanted to see whether that should reverse to be a subtraction from net income in future quarters.

Ben, there's kind of two parts to that question that I want to hit. First of all, if you go back to the guidance that Bob provided, it was the total impact of the Wells Fargo Rail transaction. In addition to what's going on in the joint venture itself, you need to look at the management fees that are earned and the incremental SG&A that GATX takes on. When you take those items into consideration, the first quarter was a net positive, all of those combined.

Importantly, going on to the second part that I want to hit, that was with very low asset disposition gains from the joint venture. Bob mentioned at the beginning of the year that we expected those gains to be about $70 million over the course of the year. In the first quarter, it was about $2 million, and that was expected. We expected that we would not do a lot of asset sales in the very first quarter, as we focused on integration. We continue to expect to do that over the course of the year. Again, reiterating, total impact in the quarter was positive, and it should be more positive going forward as we do some of those asset sales.

Great, appreciate that. Very good print on the LPI, in my opinion, the 22.3% relative to your full-year guide of high teens to 20%. We were coming in around the 20% for the quarter. That's a nice beat. Would you say this is indicative of more sustained strength and catch-up renewal rate gains to be expected over the next couple of years? Or is this somewhat high, based on lumpiness just for this quarter?

Ben, this is Paul speaking. I'll take that -- let me just, I think, start with the broad statement that the North American rail market continues to be supportive of solid performance in our business. The same supply/demand dynamics that we've talked about for a number of quarters now continue to persist, which is to say that we're not seeing a lot of new cars enter the market. High scrap prices are causing a lot of older cars to exit the market, and that is causing net fleet shrinkage across the North American rail fleet. Of course, that's very favorable for us in terms of maintaining utilization and maintaining pricing. Overall, we've said for a while the environment is supportive; we continue to see that supportive environment. We don't talk about specific guidance beyond the current year. What I'll say is, we feel very comfortable with the LPI guidance we provided for the, for the year -- for the full year. Again, we continue to see broadly supportive conditions for our business.

Great. Thank you for that, Paul. Next one, I'd like to ask about your renewal success rate, that's now in the high 70s, from the mid-80s average from last year. You had noted 4Q was a step up, just based on sort of intra-quarter lumpiness, if you will. So, would love to hear from you, whether this high 70s could indicate some impact from the Iran conflict, or is it just a step down in the quarter we should expect it to come back to the mid-80s average going forward?

Ben, I'll start. It's Bob, and then Paul will add to that. Coming into the year, back in January when we gave guidance on the LPI and a host of other metrics, we also provided one for the renewal success rate. At that point, I said it would in all likelihood be in the high 70s to low 80s. That was our expectation coming into the year, the 91% or so - whatever, that we achieved in the fourth quarter. In my 30 years at GATX, I've never seen one with a 9 in front of it. Around 80% is pretty typical, if you took a very long-term average. That's what we guided

to, and that's where we came in for the quarter, and Paul can add any additional color he'd like.

Yeah, sure. I mean, you asked about any impact of the Iran conflict -- what I'll say is, while certainly our customers expressed concern -- we all expressed concern; overall, we're not seeing really any significant deterioration, broadly speaking, in market conditions for leased railcars across North America. Certainly, again, everyone is concerned. If you look at the first quarter, I wouldn't say we've seen significant impacts on the business so far, broadly speaking.

Okay, great. Next, I'd like to ask about sort of the higher-than-expected step down in your ending balance of combined North America railcars. It looks like the 98,535 added would be the Wells -- which is a somewhat dramatic step down from the 100,000 that you started with, and also higher scrapping and higher sold in this quarter. Just wanted to ask about puts and takes there. Why was it that the add is 98,000 versus 100,000, versus close to 100,000?

Thanks, Ben, for the question. This is Paul speaking again. I think you've got to also include the boxcar fleet, which we report on separately from the overall fleet, which is just under 10,000 cars at the end of the quarter; I think that's a part of it. Broadly speaking, what I'll say is additions and subtractions from the fleet in the first quarter were more or less as expected. We really -- I would say that's kind of the answer to most of the questions on this call, which is that things have gone more or less as expected since the acquisition of the Wells Fargo fleet.

(multiple speakers) Sorry, Ben. I was going to say, if you took the -- 9,800 or 98,000 on the fleet, on the non-boxcar fleet, and then roughly another 3,000 or plus on the boxcar side, that gets you to the 101 that we talked about back in January when the transaction closed.

Disclaimer

GATX Corporation published this content on May 11, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 11, 2026 at 17:48 UTC.