Americas Transportation: 2Q Preview (Railcar Lessor/Manufacturers); Some Positive Rail Volume and ISM Trends; Key Debates

Research evidence excerpt

Americas Transportation: 2Q Preview (Railcar Lessor/Manufacturers); Some Positive Rail Volume and ISM Trends; Key Debates

Goldman Sachs Americas Transportation

earnest — particularly when considering the combination of (1) improved rail

service that exists today (in a more fluid and non-congested supply chain that allows

rails to utilize existing/secondary market assets more efficiently), and given (2)

uncertainty regarding future rail mergers and the impact on the overall rail complex

(as the pending UNP/NSC merger projects utilizing assets more efficiently and reducing

car miles per day). We continue to assume a gradual normalization in the backlog of

railcars being placed into orderbooks through 2028, which supports relatively

muted overall railcar industry deliveries in 2026/2027 (see Exhibit 2 and our recent

industry debates note); this dynamic of low new railcar supply amidst the ongoing

sticky inflationary environment likely supports ongoing positively around lease rate

renewals and secondary market activity/gains on sale — and we believe GATX remains

most exposed on a pure basis to those fundamental trends (while TRN and GBX have

leasing fleets as well, the two continue to face profit headwinds on the manufacturing

side of the equation).

In terms of the 2Q, we expect stable levels of railcar fleet utilization for GATX/TRN

leasing segments, but note higher intra-quarter rail volume trends could lead to

improvements in cars being utilized. Given relatively solid rail volume growth, we also

look for signs that leasing customers are continuing to renew their fleets with

similar-to-improved lease rate growth over expiring leases for those renewing or

expected to renew (particularly given the still-muted new railcar building environment).