Andrzej Tomczyk

Andrzej Tomczyk inquired about the impact of Airbus's lower delivery expectations and aircraft engine availability bottlenecks on GATX's spare engine leasing business, and expectations from affiliates for 2026.

Answer

Tom Ellman, Executive Vice President and Chief Financial Officer, and Bob Lyons, President and Chief Executive Officer, confirmed the global aviation market and engine leasing remain very strong due to supply constraints and maintenance backlogs. This situation increases the value of existing portfolios and provides lease rate leverage, supporting the forecast of $180 million in segment profit for engine leasing.

Andrzej Tomczyk from Goldman Sachs asked about the impact of Airbus's lower delivery expectations and engine availability bottlenecks on GATX's aircraft spare engine leasing business, and expectations for 2026 from affiliates.

Answer

Tom Ellman, EVP and CFO, confirmed the global aviation market and engine leasing remain strong, benefiting from supply constraints and maintenance backlogs. Bob Lyons, President and CEO, stated the total segment profit forecast for engine leasing is in the $180 million range for 2026, up from $165 million in 2025, highlighting increased value for existing portfolios due to long lead times.

Andrzej Tomczyk from Goldman Sachs questioned the future trend of North American maintenance expenses, potential long-term synergies from the Wells Fargo acquisition beyond SG&A, the financial breakdown of the spare engine leasing business, and the drivers behind the recent increase in North America's renewal success rate.

Answer

EVP and Chief Commercial Officer Paul Titterton explained that higher maintenance costs were due to a mix of work filling internal shops, necessitating more expensive outsourcing, but GATX aims to control costs long-term. President and CEO Bob Lyons confirmed broader synergies, including maintenance, from the Wells Fargo deal, though not immediately. EVP and CFO Tom Ellman detailed that Q3 engine leasing income was 85% operating and 15% remarketing, with year-to-date at 75% operating and 25% remarketing. Paul Titterton attributed the higher renewal success rate to a tight fleet and rational market pricing, not increased tariff certainty.

Andrzej Tomczyk of Goldman Sachs inquired about the potential impact of the recently announced transcontinental railroad merger on the railcar leasing business. He also asked about the sustainability of the strong lease price index (LPI) renewal rate and the timeline for the regulatory review of the Wells Fargo Rail transaction.

Answer

President & CEO Robert Lyons stated it was too early to assess the merger's impact but noted that long-term rail efficiencies are positive for lessors. EVP & President of Rail North America, Paul Titterton, explained that the lease rate environment remains strong and expects pricing to be 'flattish' without a new catalyst. Regarding the Wells Fargo deal, Mr. Lyons confirmed the regulatory timeline is proceeding as expected, with a target closing of Q1 2026 or earlier.

Andrzej Tomczyk of Goldman Sachs asked about the potential impact of a major transcontinental rail merger on the leasing business, the sustainability of the high 24% lease price renewal rate, and the approval timeline for the Wells Fargo Rail transaction.

Answer

President & CEO Robert Lyons stated it was too early to assess the rail merger's impact but noted long-term efficiencies are positive for lessors. He also confirmed the Wells Fargo deal timeline is on track. Paul Titterton, EVP & President of Rail North America, added that the lease rate environment remains strong and stable, predicting flattish absolute lease rates without a new external catalyst.

Andrzej Tomczyk inquired about the potential impact of the recently announced transcontinental rail merger on the leasing business, the sustainability of the high lease price renewal rates, and the regulatory timeline for the Wells Fargo Rail transaction.

Answer

President & CEO Bob Lyons stated it was too early to assess the rail merger's full impact but noted that long-term rail efficiency is positive for lessors. He also confirmed the Wells Fargo deal timeline is tracking as planned. Paul Titterton, EVP & President of Rail North America, added that the lease rate environment remains strong and stable, predicting "more of the same" without a new external catalyst, supported by what Bob Lyons described as an ongoing "supply led recovery."

Andrzej Tomczyk inquired about the potential impact of the recently announced transcontinental rail merger on the leasing business, the sustainability of the high lease price renewal rates, and the regulatory approval timeline for the Wells Fargo Rail transaction.

Answer

President & CEO Robert Lyons stated it was too early to assess the merger's impact but noted that long-term rail efficiency is positive for lessors. He also confirmed the Wells Fargo deal timeline is on track. Paul Titterton, EVP & President of Rail North America, added that the lease rate environment remains strong and stable, supported by supply-side constraints, and expects absolute lease rates to remain flattish without a new catalyst.

Andrzej Tomczyk from Goldman Sachs requested more detail on how macroeconomic volatility and tariffs are impacting the North American railcar segment, including recent customer commentary on reshoring trends. He also asked about new railcar pricing, the ability to pass on costs, and current valuations in the secondary market, along with the outlook for remarketing income.

Answer

President and CEO Robert Lyons explained that while customers express uncertainty about long-term growth, their actions, such as high renewal rates, show a clear need to retain their current fleets. EVP Paul Titterton added that customer views on reshoring are mixed and long-term in nature. Titterton confirmed new car prices are high, which indirectly supports existing fleet values, and that secondary market valuations remain strong. Lyons reiterated the full-year remarketing income forecast of $100 million to $110 million.

Andrzej Tomczyk inquired about the drivers behind the increased lease renewal success rate in North America, the potential business impact of the new U.S. administration, and any notable changes in secondary market activity.

Answer

Paul Titterton, EVP and President of Rail North America, attributed the high renewal rate to a balanced supply-demand market with disciplined new car production. Regarding the new administration, Titterton noted it's too early to know the full effects, while President and CEO Robert Lyons added that GATX is prepared for various potential tariff scenarios. Lyons also stated that secondary market sales are programmatic and diverse, a strategy that will continue into 2025.

Andrzej Tomczyk inquired about the breakdown of Trinity's 2026 EPS guidance range, specifically regarding manufacturing deliveries and ordering activity in the first half of the year. He also asked for clarification on the Q4 manufacturing margin headwind, expectations for revenue per unit in manufacturing, details on the Q4 partnership restructuring, and the company's confidence in 2026 marking a bottom for industry ordering and delivery activity.

Answer

CFO Eric Marchetto clarified that the 2026 guidance range is influenced by expected industry deliveries of 25,000 railcars and a projected $120 million-$140 million in gains from secondary market activities, including a potential Q2 partnership restructuring. He explained the Q4 manufacturing margin impact was due to a one-time credit loss and that future margins are expected to be relatively smooth at 5%-6%, with a slight shift towards higher-priced tank cars. Mr. Marchetto also elaborated on the Napier Park restructuring, emphasizing its role in demonstrating fleet value and simplifying the balance sheet. CEO Jean Savage expressed optimism that 2026 could mark a bottom for the industry, citing improving rail traffic and manufacturing job reports.

Andrzej Tomczyk asked for clarification on Trinity's 2026 guidance range, specifically how the low and high ends relate to customer demand and manufacturing delivery levels throughout the year, along with expected ordering activity in the first half. He also inquired about the 190 basis point margin headwind in Q4 manufacturing, the expected run rate, and any notes on revenue per unit and mix for 2026. Furthermore, Tomczyk sought details on the initial feedback and moving parts of the Q4 partnership restructuring, including its impact on the owned lease fleet, revenue per unit, and minority interest in 2026. Finally, he questioned the confidence in 2026 marking a bottom for ordering/delivery activity and potential risks for a prolonged downturn into 2027.

Answer

Eric Marchetto, CFO, explained that the 2026 guidance range is influenced by anticipated gains of $120 million-$140 million, with Trinity expecting to maintain its historical market share of the 25,000 industry deliveries. He clarified that the 190 basis point headwind in Q4 was a one-time reserve, and the 5-6% manufacturing margin for 2026 reflects a traditional mix and cost initiatives. Marchetto detailed the Napier Park partnership restructuring, highlighting its demonstration of fleet value, the increase in the RIV program to 45,000 railcars generating $20 million in annual fee income, and the simplification of the balance sheet. He confirmed that more gains are expected in Q2 2026 from a similar transaction. Jean Savage, CEO and President, noted improving rail traffic and manufacturing jobs as signs that 2026 may mark a bottom for the industrial slowdown, with potential improvement into 2027.

Andrzej Tomczyk from Goldman Sachs asked for clarification on the manufacturing margin ramp in H2 2025, the competitive leasing environment, the impact of steel tariffs on demand, and the potential industry effects of a major transcontinental rail merger.

Answer

CEO E. Jean Savage reiterated the full-year 5-6% margin guidance for the Rail Products segment, driven by improving volumes through the year. She described the leasing market as tight and balanced, with a high 89% renewal success rate. On potential tariffs, she noted that higher steel prices also increase scrap values, which can accelerate fleet attrition and eventually drive new orders. She viewed the proposed rail merger as a long-term positive that could improve network efficiency and drive modal share gains from truck to rail. CFO Eric Marchetto added that the secondary market remains strong, prompting an increase in the full-year guidance for gains on sale.

Andrzej Tomczyk of Goldman Sachs asked about management's confidence in converting inquiries to orders, the potential timing for orders to outpace deliveries, the percentage of railcars delivered to the internal fleet, and how manufacturing margins would perform at different levels of industry deliveries.

Answer

CEO Jean Savage stated that the company is currently finalizing several orders totaling approximately $100 million, indicating that inquiries are beginning to convert. She noted that while the fleet is tight, macroeconomic uncertainty makes it difficult to predict when the book-to-bill ratio will exceed one. CFO Eric Marchetto clarified that deliveries to the internal fleet were 29% in Q1 and are expected to be over 30% for the full year. Savage confirmed that if industry deliveries are at the low end of the 28,000-33,000 range, Trinity's margins would likely be closer to the 5% end of their guidance.

Andrzej Tomczyk questioned if Trinity's 2025 delivery decline would align with the industry's, how manufacturing margins might trend through the year, the nature of recent order inquiries, and the performance of the Parts business.

Answer

CEO Jean Savage confirmed Trinity expects to maintain its typical 30%-40% share of industry deliveries and anticipates a stronger second half for 2025. CFO Eric Marchetto provided a detailed 2024-to-2025 bridge, outlining headwinds like lower deliveries and higher taxes, and tailwinds like strong lease pricing and cost savings. Savage noted that order inquiries are still led by freight car replacement demand but that tank car inquiries have been consistent. She also highlighted strong performance from the Parts business, boosted by the Holden acquisition.

Andrzej Tomczyk asked about the largest variability within the 2026 EPS guidance buckets, specifically between the low and high ends, and the factors driving this variability.

Answer

John Diez, Executive Vice President and Chief Financial Officer, explained that the biggest variability lies in the transactional businesses (rental and used vehicle sales). He expressed confidence in contractual businesses, citing momentum in lease pricing and maintenance strategic initiatives. The low end of the guidance range contemplates further deterioration in rental and used vehicle sales.

Andrzej Tomczyk asked about the largest variability within Ryder's 2026 EPS guidance buckets, specifically between the low and high ends, and the factors driving this variability.

Answer

John Diez, Executive Vice President and Chief Financial Officer, explained that the primary variability stems from Ryder's transactional businesses, such as rental and used vehicle sales. He expressed confidence in lease pricing and maintenance strategic initiatives, noting that the lower end of the guidance range accounts for potential further deterioration in rental and used vehicle sales from Q4 levels.

Andrzej Tomczyk, on for Jordan Alliger at Goldman Sachs, asked conceptually if a potential consumer-led recession would have a less pronounced impact on freight markets, given the sector has already been in a prolonged downturn.

Answer

CFO Jennifer Hamann concurred that the truck-competitive market has been weak for some time and that UNP is now better positioned with improved service and partners. She emphasized that the franchise's broad diversity across many markets provides a natural insulation against a downturn in any single area, a historical strength for the company.