The annual results for GATX Corporation (NYSE:GATX) were released last week, making it a good time to revisit its performance. The result was positive overall – although revenues of US$1.4b were in line with what analysts predicted, GATX surprised by delivering a statutory profit of US$5.81 per share, modestly greater than expected. This is an important time for investors, as they can track a company’s performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see analysts’ latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, GATX’s five analysts currently expect revenues in 2020 to be US$1.38b, approximately in line with the last 12 months. Statutory earnings per share are expected to reduce 2.1% to US$5.79 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.40b and earnings per share (EPS) of US$5.22 in 2020. There was no real change to the revenue estimates, but analysts do seem more bullish on earnings, given the decent improvement in earnings per share expectations following these results.
The consensus price target was unchanged at US$84.80, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic GATX analyst has a price target of US$90.00 per share, while the most pessimistic values it at US$80.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
In addition, we can look to GATX’s past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. One more thing stood out to us about these estimates, and it’s that GATX’s decline is expected to slow down, with revenues forecast to fall 1.2% next year, improving on a historical decline of 1.7% a year over the past five years. Compare this against analyst estimates for companies in the wider market, which suggest that revenues (in aggregate) are expected to decline 4.5% next year. So it’s pretty clear that, while it does have declining revenues, at least analysts expect GATX to suffer less severely than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around GATX’s earnings potential next year. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Still, the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple GATX analysts – going out to 2021, and you can see them free on our platform here.
It might also be worth considering whether GATX’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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