NEW BEARISH Plays
GATX Corp. - GMT - close: 49.70 change: -0.49
Stop Loss: 52.05
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on August -- at $---.--
Listed on August 11, 2015
Time Frame: 4 to 6 weeks
Average Daily Volume = 334 thousand
New Positions: Yes, see below
Thus far 2015 has not been a good year for GMT stock. Shares are down -13% year to date and the stock looks poised to see its loss widen.
GMT is in the services sector. According to the company,
"GATX Corporation (GMT) strives to be recognized as the finest railcar leasing company in the world by its customers, its shareholders, its employees and the communities where it operates. As the largest global railcar lessor, GATX has been providing quality railcars and services to its customers for more than 115 years. GATX has been headquartered in Chicago, Illinois, since its founding in 1898."
GMT started the year on a strong note with Q4 earnings results better than expected and revenues up +12.6%. Management raised their 2015 guidance following a healthy Q4 report. Unfortunately business has slowed down significantly in the last couple of quarters.
GMT's most recent report was July 23rd. The company delivered their Q2 results of $1.03 per share. That's a -10% drop from a year ago and 19 cents worse than expected. Revenues were down -0.14% to $365 million, which is significantly below Wall Street's estimate of $384 million. These results would have been even worse if GMT has not repurchased 727,000 shares last quarter.
The company claims they have strong demand for their rental fleet of rail cars. However, they're seeing new railcar orders slowing down. Their customers are delaying new orders due to the falling price of oil. Oil transport is a significant portion of their business.
According to the U.S. Energy Information Agency (EIA) 70% of U.S. production from the Bakken formation and 64% of Niobrara production is transported by rail. According to the American Association of Railroads, the U.S. rail system transported 11 times more crude oil in 2013 than all the oil moved by trains from 2005 to 2009 (source: CNBC). At the time that was about 815,000 barrels a day. It has most assuredly risen since then as U.S. production continued to climb through 2014 and into 2015.
Now that crude oil prices have crashed it has cut demand by producers to transport it. Technically shares of GMT are in a bear market. Investors have been selling the rallies for months. They just sold the oversold bounce a couple of weeks ago. Today GMT has closed below round-number support at $50.00 and is poised to hit new two-year lows.
The point & figure chart is forecasting a $45.00 target. I will point out that short interest is almost 15% of the 42.8 million share float. We should probably consider a slightly more aggressive trade due to some volatility. Tonight I am suggesting a trigger to open bearish positions at $49.35.
FYI: GMT has a $0.38 dividend coming up in September. The ex-dividend date should be in the September 11-15 time frame.
Trigger @ $49.35
- Suggested Positions -
Short GMT stock @ $49.35
- (or for more adventurous traders, try this option) -
Buy the SEP $50 PUT (GMT150918P50) current ask $2.05
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike