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Welcome back to my weekly stock analysis. Disclaimer: I am not invested in this one.
GATX Corporation (NYSE: GATX)
Sector: Rental & Leasing Services (Industrials)
GATX is a railcar lease company with operations in North America, Europe and Asia. GATX is headquartered in Illinois and is a S&P 400 component. GATX services petroleum, chemicals, food, mining and transportation. Some recent moves were the acquisition of 3100 railcars from ECN Capital in 2018, the selling of American Steamship company in 2020, and the acquiring of Trifleet Leasing Holding in 2020.
Strengths: - Paid an uninterrupted dividend since 1989 (claims since 1919) - Rising assets - Rolls-Royce link for aircraft spare engine leasing
Risks: - Huge recent run up - Low yield - Low dividend growth rates - Cyclical revenue and ebitda - Risks of transportation and supply/demand cycles - Hyperinflation/deflation - Never really mentioned
GATX: Numbers from Seeking Alpha as of Mar 14, 2022
Numbers from Macro Trends as of Mar 14, 2022
|Current Annual Payout/Share||$2.08|
|5 Yr Div Growth Rate||4.51%|
|3 Yr Div Growth Rate||4.31%|
|1 Yr Div Growth Rate||4.17%|
|Years Of Growth||17|
|Current Payout Ratio||39.53%|
|Free Cash Flow / Share||-5.3254|
|Debt / Equity Ratio||2.9257|
|Debt / EBITDA||8.7511|
Due to the cyclical ebitda, I will ignore the 8.75 ebitda. This stock is projected to have low returns* but it did recently have a large run up. This may be the cause of the returns being so low. The dividend did drop in 2003, but did not break the continuous payout streak.
I will now use the 3 year dividend growth rate to project further.
For another way, let's use historical payout ratio to project out.
|EPS estimate 2021||5.71|
|EPS estimate 2022||6.23|
I would like to apologize in advance in case I get derailed. Most of the concerns for GATX seem obvious if one thinks about it. They are vulnerable to weather and international operations, because they are an international transportation company. They would be vulnerable to supply chain issues because you can't transport what does not exist (at least I hope not). Pandemics and shutdowns would obviously slow transportation (worse if you can't transport between countries, not just within one).
Taking a step back, I don't think transportation is going away. Sure, they might get railed in hyperinflation but one way or another, you need the intermediary to go from point A to point B. GATX seems highly diverse with tank container leasing, food, mining, chemicals, petroleum, and spare engine transport.
Crystal ball time: After a large run up like this, I am expecting a pullback to 110-115 before testing 120. I have set my estimate higher than usual since inflation is affecting all nations at the same time. While I do not know when we will see a return to normalcy, I would like to think that inflation and supply chain issues will eventually sort themselves out.
Weekly price estimate for a future date, via consulting the crystal ball: Predicted price for GATX for Jun 20, 2022: $128.76. There is no factual basis that I will give.
I hope someone out there found this post interesting. Please supplement this with your own research.
Thank you for reading, please give me feedback so that I can increase my standards for future analysis posts. If I have made a mistake, please correct me. Or if you have one that you want an analysis on, I might pick a comment to do an analysis of if I don't have any spice stored for the week. There will not be a write up next week.