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Trinity Industries, GATX anticipate market growth to be ‘nonlinear’

‘As we march forward, the market continues to improve’

GATX and Trinity Industries recently reported Q3 earnings. (Photo: Jim Allen/FreightWaves)

Railcar lessors Trinity Industries and GATX recenyl reported their third-quarter 2021 financial results:

Trinity eyes ‘stronger underlying leasing dynamics’

Although higher railcar loadings and increased levels of rail traffic are boosting demand for leasing railcars, Trinity Industries expects market growth for railcar leasing to be choppy as supply chain disruptions continue to be a headwind.

“We believe stronger underlying leasing dynamics and higher car pricing should continue to positively impact our results. And new deliveries will likely trend in line with replacement levels in 2022 and 2023,” said Trinity (NYSE: TRN) President and CEO E. Jean Savage in a third-quarter 2021 earnings call on Oct. 21. “To be clear, the trend may not be linear each quarter as our Rail Products segment results prove. That said, we remain very encouraged by the industry dynamics in place today.”

Macroeconomic fundamentals continue to “improve broadly but unevenly,” Savage said. North American industrial production levels have ebbed and flowed with supply chain disruptions, although overall industrial production is approaching pre-pandemic levels while strong North American economic growth is forecast over the next few years, she said. Slower train speeds and higher railcar scrapping levels also support the railcar leasing market. 


“Demand for railcars continues to rise as evidenced by utilization, lease rates and orders in the quarter,” Savage said.

She continued, “While higher input costs like steel can serve as a near-term headwind to deliveries, we remain very confident that higher cost will drive higher railcar values and ultimately margins as older orders work through our pipeline.”

Although labor shortages and turnover as well as supply chain disruptions dented Trinity’s Rail Product Group margin improvement initiatives, Trinity still expects improving demand for railcars and profitability, Savage said in a release last week. 

“Our Railcar Leasing and Management Services Group had another quarter of strong performance, and we maintain our view that market fundamentals for railcar leasing should continue to ramp up into 2022,” Savage said. 


Trinity posted third-quarter 2021 net income from continuing operations of $32 million, or 33 cents per diluted share, compared with net income of $25 million, or 21 cents per share, in the third quarter of 2020.

Total revenue was $504 million in the third quarter, compared with $59 million year-over-year amid increased demand and higher pricing in Trinity’s highway products business as well as higher external deliveries in the Rail Products Group.

Trinity’s third-quarter financial figures include a railcar portfolio sale worth $325 million to Signal Rail Holdings, a new railcar investment vehicle partner.

Trinity’s lease fleet utilization was 95% in the third quarter, compared with 94.8% year-over-year. New railcar orders totaled 2,530, up 27% from a year ago, while railcar deliveries totaled 2,410, down 7%. 

Through the third quarter, Trinity also received orders for over 1,400 sustainable conversions, in which it converts or upgrades existing tank cars and freight cars to better meet the demand of the market and improve the yield of the fleet, according to Savage.

GATX: The market is improving

Railcar lessor GATX eyes growing demand for railcar leasing amid improving conditions such as higher freight and container traffic levels, reasonable interest rates and strong GDP growth.

“As we march forward, the market continues to improve,” said Bob Lyons, president of GATX’s Rail North America segment, during an Oct. 21 third-quarter 2021 earnings call. “We’ll take full advantage of that and we’ll see the opportunity to turn more of our fleet into positive territory.”

Lyons explained that GATX’s (NYSE: GATX) fleet is “very, very highly diversified,” which means that its exposure to “the more challenged” car types such as coal cars or small cube covered hoppers is limited. Those car types have seen less demand in recent years because of declining demand to ship coal or frac sand. 


The Class I railroads in general experienced lower network velocity in the third quarter, which can cause an uptick in demand for railcars. However, that uptick can also be temporary, according to Lyons. 

“What we want overall is for the railroads to operate at a very efficient level so that [the railroad] is the mode of choice for our customers. If there is significant congestion, significant problems,  it can cause an uptick in demand for cars. But that tends to be short-lived,” Lyons said.

GATX’s third-quarter 2021 net income from continuing operations was $40.1 million, or $1.11 per diluted share, compared with $48.2 million, or $1.36 per diluted share, in the third quarter of 2020.

Total company revenue was $313.5 million in the third quarter, compared with $304.4 million year-over-year.

GATX’s Rail North America segment profit was $66.5 million in the third quarter of 2021, compared with $56.1 million in the third quarter of 2020. Rail North America revenue was $219.8 million in the third quarter of 2021, compared with $232.1 million year-over-year. 

GATX’s North American fleet utilization was 99.2% at the end of the quarter, compared with 98.2% in the third quarter of 2020 and 98.5% in the second quarter of 2021.

Meanwhile, GATX’s Rail International segment profit was $27 million in the third quarter, compared with $24 million year-over-year. GATX’s Rail International revenue was $71.5 million versus $67.1 million a year ago.

Of GATX’s international segment, GATX President and CEO Brian Kenney said in a release that demand for railcars in Europe and India remains “robust,” although the pace of fleet growth in 2021 has been negatively impacted by COVID-19-related new car delivery delays in both regions.

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.