Greenbrier Companies Inc (GBX), GATX Corporation (GMT): Railcar Producers and Leasing Companies

The selloff of GATX Corporation (NYSE:GMT) shares due to a first-quarter share profit that fell well below forecasts shouldn’t deter investors. One-time nonoperating items were partly to blame for the shortfall. GATX Corporation (NYSE:GMT) is booked through much of 2014 and into 2015 at record rates. Note that maintenance expense increases of about 10% this year will limit profit growth but the impact should subside over time. GMT stock is worth considering for the long haul.

The conversation would not be complete without mentioning diversified manufacturer and service provider Trinity Industries Inc (NYSE:TRN). Its manufacturing arm is thriving behind volume and rate increases with regard to railcars. In fact, in contrast to Greenbrier Companies Inc (NYSE:GBX), Trinity Industries Inc (NYSE:TRN) is anticipating increased sales levels in 2013 by a range of 6% to 13%.

As for its leasing business, it too is reporting rising terms and lengths allowing for profit gains. Increased demand from the oil/gas and chemical sectors is being offset by a slowdown from its agricultural and coal customers.

In combination with other operating divisions (railcar-related units contribute about 70% of total revenues), profits are on track to grow by leaps and bounds in 2013. Energy Equipment, for instance, is another growing business unit. A downside to the stock and what might be holding it back is its sizable debt balance. Nevertheless, Trinity Industries Inc (NYSE:TRN) plans to further expand its railcar fleet through a net investment of around $550 million this year. Trinity Industries Inc (NYSE:TRN) shares may be considered for their near-term price appreciation potential, or as a long-term holding.

Riding the Railcars

Like the rail transporters, railcar manufacturers and leasing companies’ fortunes are tied to the broader U.S. economy. More importantly, though, what sets these stocks apart at this time is their strong fundamentals along with positive earnings prospects. Value investors might want to take a look at the sector at this time, in light of contracted valuations.

Damon Churchwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Damon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Railcar Producers and Leasing Companies originally appeared on Fool.com is written by Damon Churchwell.

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