Earnings call transcript: GATX Q2 2025 sees robust earnings growth

GATX Corporation reported a strong performance in Q2 2025, with net income rising to $75.5 million, or $2.06 per diluted share, compared to $44.4 million, or $1.21 per diluted share, in Q2 2024. The company also increased its full-year earnings guidance to $8.50-$8.90 per diluted share. GATX’s stock price saw a 1.79% increase, closing at $170.64, despite a slight dip of 0.96% in premarket trading. According to InvestingPro data, the company maintains impressive gross profit margins of 74.14% and currently trades near its 52-week high of $178.26.

Key Takeaways

• GATX’s Q2 2025 net income rose significantly compared to the previous year.
• Full-year earnings guidance was increased, reflecting confidence in future performance.
• Rail North America fleet utilization reached an impressive 99.2%.
• The company is preparing for the closure of the Wells Fargo Rail transaction by Q1 2026.
• The global air passenger volume is driving strong demand for GATX’s engine leasing business.

Company Performance

GATX demonstrated robust growth in Q2 2025, with net income increasing by 70% year-over-year. This growth is attributed to high fleet utilization and strong demand in the rail and engine leasing markets. The company continues to benefit from a robust North American secondary market, while facing challenges in Europe due to macroeconomic headwinds. With a market capitalization of $6.2 billion and revenue growth of 11.74% over the last twelve months, GATX shows strong fundamental performance. InvestingPro analysis suggests the stock is currently trading above its Fair Value, with 13 additional key insights available to subscribers.

Financial Highlights

• Revenue for Q2 2025 was not disclosed.
• Net income: $75.5 million, up from $44.4 million in Q2 2024.
• Earnings per share: $2.06, a significant increase from $1.21 in the previous year.
• Year-to-date net income for 2025 reached $154.1 million, compared to $118.7 million in 2024.

Outlook & Guidance

GATX has revised its full-year earnings guidance upwards to $8.50-$8.90 per diluted share, signaling strong expectations for the remainder of the year. The company anticipates continued strength in its engine leasing business and plans to invest approximately $200 million in its engine portfolio. The pending Wells Fargo Rail transaction is expected to close by Q1 2026 or earlier. Analyst consensus remains bullish, with price targets ranging from $182 to $201. For deeper insights into GATX’s valuation and growth prospects, access the comprehensive Pro Research Report available exclusively on InvestingPro, covering detailed analysis of 1,400+ top US stocks.

Executive Commentary

Bob Lyons, CEO, emphasized the long-term value of railcars, stating, "Railcars through cycles, through time, over decades, have proven to be tremendous stores of value." CFO Tom Ellman expressed confidence in the engine leasing business, noting, "We expect that to be strong through the rest of the year."

Risks and Challenges

• European market challenges due to macroeconomic conditions.
• Potential impacts from the UP-Norfolk Southern merger.
• Fluctuations in global air passenger volumes affecting engine demand.
• Supply chain disruptions could impact railcar placements.
• Volatility in the secondary market for railcars and engines.

Q&A

Analysts inquired about the potential impact of the UP-Norfolk Southern merger and the performance of the engine leasing business. GATX executives clarified the due diligence process for the Wells Fargo transaction and reiterated their positive outlook for the engine leasing sector.

Full transcript - GATX Corp (GATX) Q2 2025:

Eric, Conference Operator: Thank you for standing by. My name is Eric and I will be your conference operator today. At this time I would like to welcome everyone to the GATX Corporation 2025 second quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you’d like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press STAR one again. I would now like to turn the call over to Shari Hellerman, Head of Investor Relations. Please go ahead.

Shari Hellerman, Head of Investor Relations, GATX Corporation: Thank you. Good morning and thank you for joining GATX’s 2025 second quarter earnings 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 2024 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 2025 second quarter net income of $75.5 million or $2.06 per diluted share.

This compares to 2024 second quarter net income of $44.4 million or $1.21 per diluted share. The 2024 second quarter results include a net negative impact of $8 million or $0.22 per diluted share from tax adjustments and other items. Year to date, 2025 net income was $154.1 million or $4.21 per diluted share. This compares to $118.7 million or $3.25 per diluted share for the same period in 2024. The 2024 year to date results include a net negative impact of $7.4 million or $0.20 per diluted share from tax adjustments and other items. These items are detailed in the Supplemental Information section of our earnings release. Now I’ll briefly address each of our business segments and after that we’ll open the call up for questions. At GATX Rail North America, we continue to experience stable demand for railcars.

Our fleet utilization was 99.2% at quarter end and our renewal success rate was strong at 84.2%. We continue to achieve strong renewal lease rate increases while successfully extending term. The renewal rate change of GATX’s lease price index was positive 24.2% for the quarter and the average renewal term was 60 months. Additionally, we continue to successfully place new railcars from our committed supply agreement with a diverse customer base. We have placed over 6,500 railcars from our 2022 Trinity supply agreements. Our earliest available scheduled delivery under this supply agreement is in the first quarter of 2026. The secondary market in North America remains robust. We generated over $34 million in remarketing income during the quarter, bringing the year-to-date total to approximately $65 million. Turning to Rail International, GATX Rail Europe utilization was 93.3% at quarter end.

As noted in the release, the business environment in Europe is challenging and uncertain relative to either North America or India. Given macro headwinds and slower GDP, in Germany, some customers are delaying their fleet planning decisions, which is impacting fleet utilization. Despite current conditions, we maintain a positive long-term outlook on the European railcar leasing market and will continue to look for attractive investment opportunities there. In India, freight volume continues to benefit from the country’s ongoing infrastructure investments. As such, we continue to see strong demand for railcars in India. GATX Rail India’s fleet utilization remained high at 99.6% at quarter end. Within engine leasing, our joint venture with Rolls-Royce and Partners Finance and our wholly owned engine portfolio produced excellent second quarter results. A strong global air passenger volume continues to drive robust demand for aircraft engines.

We’re seeing very strong demand across engine types from global air carriers, and the secondary market for engine sales is healthy. Regarding the pending Wells Fargo Rail transaction announced at the end of May, we’re excited about the opportunities it offers. Due to the customary regulatory reviews, all of which are underway at this stage, we’re limited in what we can say beyond what we’ve already disclosed. Finally, reflecting our year-to-date performance and outlook for the balance of the year, we are increasing our 2025 full-year earnings guidance to a range of $8.50 to $8.90 per diluted share. This guidance excludes the impact of tax adjustments or other items and excludes any impacts from the Wells Fargo transaction. Those are our prepared remarks. I’ll hand it back to the operator so we can open it up for Q&A.

Eric, Conference Operator: At this time I would like to remind everyone in order to ask a question, please press Star followed by the number one on your telephone keypad. Your first question comes from the line of Andrzej Tomczyk with Goldman Sachs. Please go ahead.

Yeah, hi, good morning. Thanks for taking my questions. The first one, just given this morning’s deal announcement for a potential transcontinental rail merger, was curious if you could share any initial thoughts on how this could impact the overall leasing business.

Bob Lyons, President and Chief Executive Officer, GATX Corporation: Andre, this is Bob Lyons. Given the fact that the announcement was just made this morning, it’s difficult to assess, particularly given the timing uncertainty and conditions that may be put on the parties to the merger. Right now, very difficult to assess. Longer term, greater efficiency on the rails, more product moving by rail, more car load, traffic, all of those are long term good things for railcar lessors.

Understood. Appreciate the thoughts. Just switching gears a little bit. Your lease renewal rate, the change was 24% in the second quarter, which was similar to last quarter. Are you seeing any indications that we could continue to hold the high lease price renewal? I guess in what type of environment could we see that reaccelerate?

Paul Titterton, Executive Vice President and President of Rail North America, GATX Corporation: This is Paul Titterton speaking and thanks for the question. I mean, broadly speaking, what I would say is the market for existing railcars remains pretty similar to how it’s been the last few quarters, which is to say that pricing remains relatively strong. Of course, we’ve got expirations coming off of a weaker pricing environment, and that has continued to provide a pretty strong LPI result. At this point, I would say in the absence of any stimulus, positive or negative, we continue to see kind of more of the same from a pricing standpoint. Either up or down, there would have to be some external catalyst to really change that environment. At this point, we don’t really see that catalyst. I would say the best predictor in terms of absolute lease rates is probably more of the same right now.

Bob Lyons, President and Chief Executive Officer, GATX Corporation: I would just add, Andrzej, too, that all of the elements of the supply-led recovery that we’ve talked about now for many quarters in a row very much remain intact.

Got it. We can just assume sort of normally sequentially increasing or flattish overall absolute lease rates. Is that the right way to think about it?

Paul Titterton, Executive Vice President and President of Rail North America, GATX Corporation: Yeah, I would say flattish is probably pretty reasonable. That’s what we’ve been seeing for quite some time now.

Understood. Lastly, for me, we saw intra quarter the EU had set a provisional deadline of August 20th to rule on your merger or the JV, sorry, with Wells Fargo and Brookfield. I’m just curious, is there anything to read into there in terms of approval, timelines, anything tracking earlier than expected or still on the same sort of runway.

Bob Lyons, President and Chief Executive Officer, GATX Corporation: Nothing unusual about that particular filing or the response from the EU Commission. Everything is tracking as planned in terms of filing and timelines. There is really no change in our Q1 2026 or earlier estimate from prior.

Got it. Thanks for the questions and congrats on the next quarter.

Thank you.

Eric, Conference Operator: Your next question comes from the line of Brendan McCarthy with Sidoti and Company. Please go ahead.

Bob Lyons, President and Chief Executive Officer, GATX Corporation: Great.

Good morning everyone. Thanks for taking my questions here. I wanted to look at the engine leasing business. To start off, it looks like results from RRPF stepped down a little bit from last quarter. Just curious as to what the profit mix has been there through the first six months of the year, whether it be operating income or remarketing gains, and maybe talk about your expectations for the remainder of the year.

Tom Ellman, Executive Vice President and Chief Financial Officer, GATX Corporation: Yeah, thank you for the question. This is Tom. Just to give you the numbers. For the second quarter, operating income was about 85% of the total, and remarketing was about 15%. Year to date, we’re around 70%, 30% operating income to remarketing activity. As we mentioned in the press release, the key reason that we’re taking up guidance is the performance in the engine leasing business. We expect that to be strong through the rest of the year. One of the things that I think you’ll see is over time, the remarketing side of that should probably get to be a little bit higher, a total percentage.

Great.

That makes sense. Thanks for that insight, Tom. As you look into the back half of the year, have you noticed any shifts in demand or changes in the trend as it relates to remarketing income in the engine leasing business?

There really isn’t a whole lot of trending as far as that goes. It’s always very lumpy, and what we can say is that it remains very strong. There’s a lot of demand for those engines in the secondary market, so a lot of remarketing activity available. What really is the question is the timing. When does it occur?

Bob Lyons, President and Chief Executive Officer, GATX Corporation: Brandon, I just add to that too. It’s a bit amplified at RRPF or within our own engine leasing business, just given the sheer magnitude of each asset, the net book value. Whereas in rail we’re selling hundreds of cars for nice gains, in the engine leasing business, it’s a few engines sold here and there for much more sizable gains.

Tom Ellman, Executive Vice President and Chief Financial Officer, GATX Corporation: Kind of.

Bob Lyons, President and Chief Executive Officer, GATX Corporation: The magnitude of the shift from quarter to quarter can be a bit more amplified.

Got it, got it. That makes sense. When you look at investment volume there, unless I’m reading into this incorrectly, it looks like there hasn’t been any investment volume in the wholly owned portfolio through the first six months of the year, down from about $71 million same period last year. I think at one point you mentioned you target roughly $200 million per year. I know that a lot of that is dictated by what Rolls-Royce decides. Just curious as to what investment volume might look like for the rest of this year in the GEL portfolio.

Tom Ellman, Executive Vice President and Chief Financial Officer, GATX Corporation: Yeah. I’ll start and then I’ll let Bob add to it. Kind of repeating our last answer, that side of the business is also pretty lumpy for the same reason because, you know, each engine is such a material investment in of itself. We certainly expect to see some investment volume in the second half of the year. Coming into the year, you know, we had said we thought it would be kind of in that range similar to the last couple years. I’ll let Bob add to that.

Sure.

Bob Lyons, President and Chief Executive Officer, GATX Corporation: Kind of take it in two parts. The $200 million number you mentioned is certainly still within reason. It may be a little less than that just based on, as you said, where Rolls-Royce has its needs and where it allocates its engine sales. We expect a pretty healthy investment level activity in the second half of the year. I’d also add that at the joint venture level at our RRPF, we came into the year expecting somewhere in the range of $800 million total investment volume for the year. It will be north of that for sure. Still seeing very good investment activity overall in the engine portfolio. The mix may change a little bit. Whether it’s directly owned or at RRPF, we participate either way. It’s all good on that front.

That’s great. Thanks, Bob. Thanks, Tom. I appreciate the insight. That’s all from me, and congrats again on a good quarter.

Shari Hellerman, Head of Investor Relations, GATX Corporation: Thank you.

Eric, Conference Operator: Your next question comes from the line of Justin Bergner with Gabelli Funds. Please go ahead.

Morning, Tom. Good morning, Shari.

Paul Titterton, Executive Vice President and President of Rail North America, GATX Corporation: Morning.

Shari Hellerman, Head of Investor Relations, GATX Corporation: Morning.

Good quarter. Thanks for taking my questions. First question, just to verify, is the entire $0.20 guidance increase attributable to engine leasing, and any reason why you might not have considered narrowing the guidance range at this point in the year with it being halfway over? I realize you don’t always do that, but just wondering.

Tom Ellman, Executive Vice President and Chief Financial Officer, GATX Corporation: Yeah, Justin, certainly the majority of the increase in guidance is due to what we expect to have happen in the engine leasing business. Really, kind of going back to some of Brendan’s questions, the reason for that range is because of the scale of each of those remarketing events, it’s difficult to really pinpoint the timing. The same is true, quite honestly, in Rail North America, where one of the big pieces of uncertainty is the timing of those various gains that we’ll get on the remarketing of the railcars. That’s really why the range is where it’s at.

Okay, gotcha. In the last few weeks, have you seen any change or kind of stalling in the secondary market ahead of the speculation relating to today’s UP Norfolk Southern announcement? Do you expect, you know, this period of regulatory review and potentially uncertainty to change the secondary market dynamic?

Paul Titterton, Executive Vice President and President of Rail North America, GATX Corporation: Yeah, Justin, this is Paul, I’ll answer that question. The answer is no. There’s been no slowdown at all. We really don’t think, while obviously the announced merger is very significant for the rail industry overall, in terms of the railcar secondary market, we don’t see any impact at all. I mean, really, what’s driving the railcar secondary market is there’s still a lot of capital that wants to invest in railcars, and because new car volume is down and is expected to stay down for some time, that capital really wants to flow into the secondary market. Quite honestly, secondary market is robust and we expect it to remain robust.

Okay, even though some of the efficiencies perhaps targeted in today’s announcement might mean a slightly smaller need for railcars if the line can move more productively, you just think that’s trumped by the demand for capital flowing into this space.

Yeah.

Bob Lyons, President and Chief Executive Officer, GATX Corporation: Historically, and looking forward, Justin, it’s Bob. Railcars through cycles, through time, over decades, have proven to be tremendous stores of value, and capital flows into the market accordingly. It’s always been an asset class that people have been interested in investing in and continuing to grow their portfolios. We don’t see any change in that. The other thing I would mention too is, I don’t know the stated or unstated period for regulatory approval for that transaction announced this morning, but it’s likely to be protracted. You add integration on top of that. It’s a pretty extended period. We’re not anticipating any near term impacts on demands in our portfolio or the secondary market.

Thank you. Lastly, strong international performance from a profitability point of view. Any way you can help me decompose that a little bit further beyond what was called out in the press release? I noticed the other revenue kind of ticked up, but just strong segment profit there sequentially in year on year.

Tom Ellman, Executive Vice President and Chief Financial Officer, GATX Corporation: Yeah, you got to look a little deeper at some of those Rail International numbers. When we came into the year, Bob indicated that the Rail International business would be up between about $5 million and $15 million from a segment profit standpoint. For the first half of the year, we’re kind of tracking with that. We’re at the lower end of the range. Most of that actually is driven by exchange rates. If you correct for that, the segment profit is roughly equal to what we had for the first six months of last year, which is a little bit below expectations. The reason for that is some of the challenges that we’ve seen in the intermodal market in Europe have expanded a little bit to a couple other car types. You probably saw the utilization drop a little bit in the Rail International segment.

We’re still tracking, like I said, similar to last year, but that’ll be a little bit down, absent FX, from what we expected coming into the year.

Bob Lyons, President and Chief Executive Officer, GATX Corporation: Great.

Thanks for taking all my questions.

Eric, Conference Operator: Thank you. Your next question comes from the line of Bascome Majors with Susquehanna. Please go ahead.

Good morning. It’s been two months since you announced.

Tom Ellman, Executive Vice President and Chief Financial Officer, GATX Corporation: The Wells deal.

I don’t know what you’ve been able to accomplish in due diligence that maybe wasn’t allowed during the negotiation process, but can you give us an update on what you’ve been able to dig into incrementally, and if you know the synergy expectations for what this can mean on, be it maintenance or other items, are coming into better focus.

Thank you.

Bob Lyons, President and Chief Executive Officer, GATX Corporation: Sure, Bascome. I’ll just go back to a comment I believe I made on the conference call a couple of months ago at the end of May, when we announced the transaction, that given the length of time we were structuring the transaction and in dialogue with Wells Fargo and going through the due diligence, by the time we announced the transaction at the end of May, there was very little left for us to do in terms of due diligence. The heavy lifting had been done and Wells Fargo had been very forthcoming in building out an exhaustive data room that had virtually everything, you know, by and large, we would need to complete due diligence. We didn’t anticipate finding any surprises post announcement and we haven’t. I won’t comment much more beyond that, given that we’re still not the rightful owner of the portfolio.

We look forward to closing on it. All of the assumptions we had coming into the transaction on the announcement today are holding very firm and we feel really very, very positive about the transaction.

What assumption did you make on synergies when you announced the transaction, and when might you update us on what that could look like longer term?

Yeah, we didn’t really get into much detail at the time of the announcement. We said it would be accretive, but we hadn’t provided much detail on that and won’t until we get to closing of the transaction, which we expect Q1 2026 or sooner. When we get to that point and we’re at the closing, we can be much more forthcoming with those synergies and the outlook for the portfolio and for the integration with our business.

Thank you.

Thank you.

Eric, Conference Operator: There are no further questions at this time. I’d now like to turn the call back over to Shari Hellerman for closing remarks. Please go ahead.

Shari Hellerman, Head of Investor Relations, GATX Corporation: I’d like to thank everyone for their participation on the call this morning. Please contact me with any follow-up questions. Have a great day. Thank you.

Eric, Conference Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining, and you may now disconnect.

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