By Todd Bunton
 

Estimates have been rising for railcar leasing company, GATX Corp. (GMT), after the company delivered a strong first quarter earnings beat on April 26.
It is a Zacks "buy."

Based on current consensus estimates, analysts project 34% earnings per share growth this year and 15% growth next year. On top of this, the company pays a dividend that yields a solid 3.1%.

And valuation is attractive too, with shares trading at a discount to their historical median.

GATX is one of the largest railcar leasing companies in the world. It was founded in 1898 and is headquartered in Chicago. It has a market cap of $1.8 billion.

First-quarter results

GATX delivered better than expected first quarter results on April 26. Earnings per share came in at 68 cents, beating the Zacks Consensus Estimate by 19 cents. It was the company's third consecutive positive earnings surprise.

Revenues rose 7% to $284.5 million, driven by a 3% increase in Lease Income. The North American fleet utilization improved to a solid 98.5% at the end of the first quarter.

Income before taxes surged 69% as the company was able to leverage its fixed expenses.

Estimates rising

Management reiterated its earnings guidance of $2.40-$2.60 per share for fiscal 2012. Nonetheless, this prompted analysts to revise their estimates higher for both 2012 and 2013, sending the stock to a Zacks No. 2 Rank "buy."

The Zacks consensus estimate for 2012 is now $2.68, above guidance, and representing 34% growth over 2011 earnings per share. The 2013 consensus is currently 15% higher at $3.09.

On top of this growth, GATX pays a dividend that yields a solid 3.1%.

The company cut its dividend back in 2004 but has raised it at a compound annual rate of 5% since then. However, it still remains slightly below its pre-cut high.

Reasonable valuation

Despite strong Q1 results and rising estimates, shares of GATX trade at just 13.5 times 12-month forward earnings, a discount to its 10-year median of 15.4 times.

Its price to book ratio of 1.5 is also below the industry median of 2.0.
 

With rising estimates, strong growth, a solid dividend and reasonable valuation, GATX offers investors a lot to like.
 

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor Service.

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