GATX Corp. (NYSE:GATX) Q4 2014 Earnings Conference Call - Final Transcript

Jan 22, 2015 • 11:00 am ET

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GATX Corp. (NYSE:GATX) Q4 2014 Earnings Conference Call - Final Transcript

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Q & A
Operator
operator

Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions). Mike Baudendistel, Stifel.

Analyst
Mike Baudendistel

I just wanted to notice that you didn't provide an outlook for the lease price index in 2015. And just wondering if you think it is likely that is going to be at a lower rate of change than it was in 2014 just due to more difficult comps associated with expiring leases.

Executive
Bob Lyons

Good morning Mike, it's Bob Lyons. We actually expect the LPI to have another very strong year in 2015. As you know we came into 2014 expecting the LPI to be in the mid-30% range and we actually finished the year as Jennifer noted right around 39%, so very strong performance.

So in 2015 we're again expecting the LPI as we look at it today to be in that mid-30% range, which is an incredibly strong number. So very positive outlook there. I would echo some of the comments that Brian made that if the energy markets remain low and we're in an extended period of low crude prices, our customer's behavior may change we may have to adjust our commercial strategy accordingly. And as a result, I think the LPI could be more volatile in 2015 on a quarter-to-quarter basis. We'll have to see how that plays out as the year progresses.

I'd add that -- despite the potential

Executive
Bob Lyons

for some volatility in the LPI we don't envision and I can't envision a scenario where the LPI is not in very-very positive territory and very strong in 2015. And I think that speaks very directly to the diversity of our fleet and the renewal strategy and term strategy, we've had over the course of the last few years. So our outlook for the LPI in 2015 is again very positive.

Analyst
Mike Baudendistel

Good. And I also wanted to ask, have you seen, as a result of the really strong production in terms of the number of tank cars, the past several quarters really being at record levels? Is that having an impact on the new lease rates? I understand you said that the lease rates are still up for most commodity types, but if you were to compare lease rates on tank cars right now versus a couple of months ago, is that sort of having a disruptive impact on the market at all?

Executive
Brian Kenney

That's a good question. And generally it's tough to do quarter-to-quarter sequential quarter comparisons. But if I look at what tank rates did throughout 2014 and continue in the fourth quarter they're generally up low single mid digit base 5% or 7% from 2013 fourth quarter and that progressed fairly evenly through the year. Once again the exception being that 30,000 gallon tank car which has been under pressure due to that regulatory uncertainty for quite some time. Those rates have come down over the last year.

Operator
operator

Justin Long, Stephens.

Analyst
Justin Long

First question, you guys have been pretty clear about the strategy of pushing term on tank cars. And just being in