GATX (NYSE:GATX) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
Access the full call at https://events.q4inc.com/attendee/354489716
Summary
GATX Corporation reported a strong third quarter with diluted earnings per share of $2.92, up from $2.25 in the previous year.
Rail North America benefited from favorable market conditions, with a high fleet utilization rate of 98.4% and a strong renewal success rate of 86.1%.
The company expects full-year earnings to modestly exceed the upper end of the previously guided range of $9.90 to $10.30 per share.
GATX repurchased approximately 442,000 shares for $78.5 million during the quarter, totaling over 732,000 shares year-to-date.
Rail International saw solid performance with improved fleet utilization in Europe and expansion in India.
Engine leasing showed excellent results, supported by strong global air travel, with investment volume in the RRPF joint venture nearing $1 billion.
Management indicated continued strength in the secondary market for railcars, expecting to slightly exceed the $200 million target for Rail North America remarketing for 2026.
The integration of Wells Fargo’s rail assets has progressed well, contributing to higher management fee income.
The company maintains a long-term approach to financing, with less than 10% of debt at floating rates, minimizing the impact of short-term interest rate fluctuations.
Full Transcript
OPERATOR
GATX 2026 third quarter earnings call. After today’s prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star-one to raise your hand. To withdraw your question, press star-one again. I will now hand the conference over to Sherry Hellerman, Head of Investor Relations. Sherry, please go ahead.
Sherry Hellerman (Head of Investor Relations)
Thank you, operator. Good morning, and thank you for joining GATX’s 2026 third quarter earnings call. I’m joined today by Bob Lyons, President and Chief Executive Officer; Tom Elman, Executive Vice President and Chief Financial Officer; and Paul Chitterton, Executive Vice President and President of Rail North America. As a reminder, some of the information you’ll hear during our discussion today will consist of forward-looking statements. Actual results or trends could differ materially from those statements or forecasts. For more information, please refer to the risk factors included in our earnings release and those discussed in GATX’s Form 10-K for 2025 and our other filings with the SEC. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.
Earlier today, GATX reported 2026 third quarter diluted earnings per share of $2.92 compared to $2.25 in the third quarter of 2025. For the first nine months of 2026, GATX delivered diluted earnings per share of $8.11 compared to $6.46 for the same period in 2025. The 2025 third quarter and year-to-date results include a net positive impact of $0.15 per diluted share from tax adjustments and other items. These items are detailed in the Supplemental Information section of our earnings release.
I’ll briefly address each of our business segments. After that, we’ll open the call up for questions. At Rail North America, market conditions remain positive. Leasing fundamentals benefited from a favorable supply-demand environment and strong interest in existing fleet assets. These conditions continue to support attractive renewal economics and secondary market opportunities across the fleet. The renewal success rate was strong at 86.1% and fleet utilization increased to 98.4% at quarter-end. The renewal rate change of GATX’s Lease Price Index was positive 12.4% with an average renewal term of 52 months.
We continue to successfully place new railcars under our Committed Supply agreement with a diverse customer base. We’ve placed about 10,300 railcars under our 2022 Trinity supply agreement. Our earliest available scheduled delivery under this agreement is in the second quarter of 2027. Demand for railcars in the secondary market remained exceptionally strong during the quarter. Net gains on asset dispositions in Rail North America were $50.3 million in the quarter and $167.8 million year-to-date. Additionally, we continue to realize benefits from the acquisition of Wells Fargo’s rail assets. Integration efforts have progressed well and we are leveraging GATX’s scale, customer relationships, and portfolio management capabilities across the larger fleet.
We also benefited from higher management fee income during the quarter, driven in part by asset sale activity within the Brookfield-owned portfolio. Turning to Rail International, performance was solid in the quarter. GATX Rail Europe’s fleet utilization improved to 96.1% at quarter-end and we continued pushing up renewal lease rates for various car types. In India, we further expanded the fleet during the quarter while maintaining full utilization. Across Rail International, we continue to see attractive opportunities for investment and growth.
Engine leasing delivered excellent results during the quarter. Portfolio performance remained strong as healthy global air travel activity continued to support high utilization and attractive lease rates. At RRPF, we continue to deploy capital into attractive opportunities with investment volume at the joint venture approaching $1 billion year-to-date. During the quarter, GATX repurchased approximately 442,000 shares for $78.5 million. Year-to-date, we’ve repurchased more than 732,000 shares for approximately $130 million.
Finally, we now expect 2026 full-year earnings to modestly exceed the upper end of our previously announced guidance range of $9.90 to $10.30 per diluted share. This guidance excludes any impact from net tax adjustments and other items. And that concludes our prepared remarks. I’ll hand it back to the operator so we can open the line for questions.
OPERATOR
We will now begin the question-and-answer session. Your first question comes from Ben Moore with Citi. Ben, your line is now open. Please go ahead.
Ben Moore (Analyst at Citi)
Hi, good morning. Thanks so much for taking my call. Wanted just to maybe start off asking about the LPI. Looks like it’s softer than expected at the 12.4%. You’ve not yet lapped the 2Q hopper impact, and yet it stepped down from 2Q. So just wanted to see if that was the only driver or if there were other drivers on top, the 2Q hopper impact that won’t get lapped until 2Q next year. And your full-year LPI target, I think to date, has been the lower end of your previously guided high-teens to low-teens range for ’26.
So just wanted to see your outlook on that as well.
Paul Chitterton (Executive Vice President and President of Rail North America)
Good morning, Ben. This is Paul speaking. Happy to answer that question. I think Bob will probably chime in as well. But broadly speaking, I think it’s important to understand with our LPI, it’s done on a trailing 12-month basis. And so one thing that’s happening over the course of this year is each successive quarter is incorporating another quarter of GABX. So by the end of this year we’ll have GABX fully incorporated—I should say the former Wells Fargo fleet, which is known as GABX.
But as well, I would say you have that going on, you have mix, and then you do have the continued impact of the sand cars. So really all three of those things are impacting the LPI. I will say broadly, when we think about sequential pricing in the fleet, we are actually seeing across most of the fleet flat to slightly up sequential pricing. So certainly the pricing climate for our fleet overall is, I would say, becoming increasingly favorable, although the LPI, as you pointed out, has been lower for the reasons I just described.
Bob Lyons (President and Chief Executive Officer)
Ben, it’s Bob. Thank you for the question. And I just wanted to add regarding the LPI, just doing a little back-of-the-envelope math: the difference between, call it a 12% LPI and a 17% LPI in a given year is less than $5 million of revenue on an annual basis, and that’s off our revenue base of about $2.4 billion. So when you really kind of pencil out the impact of the LPI, the variance in any given year, the impact on our revenue line is de minimis.
Now, obviously, that accumulates over time and gives you a different answer. But in the present year, or in ’27, for example, it’s not that material.
Ben Moore (Analyst at Citi)
Great, thanks so much for that color. My next question then is on what you’ve mentioned—the higher management fee in the quarter on the higher asset-sale activity in the Brookfield-owned portfolio for Rail North America—and it looks like that’s tied to North American remarketing that’s also been very strong in 3Q. So maybe sort of a multi-point question: are you still holding your $200 million target for Rail North America remarketing for ’26? And if so, should we expect the positive lumpiness in 3Q to step down to a meaningful step down in 4Q, and then that should drive lower management fee—sort of your other revenue in Rail North America—for 4Q as well?
Tom Elman (Executive Vice President and Chief Financial Officer)
Yeah, Ben, so I’ll try to take both parts of those questions. One, you alluded to it in your question, but just so that everyone is totally clear, GATX earns two different types of management fees related to the Wells Fargo Rail transaction. First, we earn a fee—and this is what you were referring to—for managing the long-term lease portfolio, which is wholly owned by Brookfield. Second, we earn a fee for managing the operating lease portfolio joint venture with Brookfield, and today we own 33.5% of that JV.
So, as you noted, the first fee is what’s up sequentially this quarter. For the first two quarters, we earned about $2.8 million in fees in each quarter, and this quarter it was almost $15 million—so a meaningful increase. And that increase was driven by the fact that under certain conditions, GATX earns additional fees for asset sales out of that portfolio. Now, of course, the decision on what to sell and when to sell are ultimately made by Brookfield, but GATX gets paid a fee for making recommendations and executing on those sales.
Related, but separately, in our own business, the secondary market continues to be strong, and we do expect to exceed slightly the $200 million that we mentioned at the beginning of the year for asset dispositions. As we’ve discussed many times, calling the exact timing on when those sales close is challenging, but we certainly do expect directionally to do a bit better than we originally anticipated.
Ben Moore (Analyst at Citi)
Wonderful. Thank you so much, Tom. My last question is looking out longer term. There’s been some investor interest on a longer-term growing narrative for nat gas for data centers, where behind-the-meter prime power generators would be driven more by nat gas turbines or reciprocating engines fueled by nat gas, given there’s not enough grid to go around for all the data center build. Wanted to ask you, from your view, how much of this could be an opportunity for you?
Are your tank cars suited to moving this expansion in nat gas, presumably as LNG?
Paul Chitterton (Executive Vice President and President of Rail North America)
Yeah. So this is Paul speaking, Ben. It’s a good question. So for the most part, natural gas moves by pipeline in North America and really throughout the world. LNG tank cars are today quite rare and are extraordinarily expensive to construct. There are certainly folks talking about LNG by rail, but that’s not a market in which we play today, and it’s not clear under what conditions we might play. So I would say any contribution to our business from that would be speculative at this point.
Ben Moore (Analyst at Citi)
I appreciate it. Thank you so much.
OPERATOR
Your next question comes from the line of Andrew Tomczyk with Goldman Sachs. And your line is now open. Please go ahead.
Andrew Tomczyk (Analyst at Goldman Sachs)
Yeah, hi. Thanks for the question, everybody. Just curious to start off on the guide for, you know, modestly exceeding the top end of the $9.90 to $10.30 earnings range for this year. Could you help maybe frame up how you guys are thinking about what modest means and if there’s any drivers that could cause you to exceed your expectations for modestly beating the top end? I know it seemed like the third quarter, from our perspective, was a pretty healthy beat versus expectations, so just trying to grasp sort of the strength versus your expectations here heading into the fourth quarter.
Tom Elman (Executive Vice President and Chief Financial Officer)
Yeah, thanks for the question, Andre. So I’ll first kind of recap what’s happened so far and then our decision to revise the guidance to modestly exceeding the top end of the range. For the first nine months of the year, most things were generally in line with our expectations coming into the year. Despite economic and geopolitical uncertainty, the favorable supply-demand dynamics continue to drive positive results. Results for Rail North America and the GATX Rail Europe team continue to successfully navigate a challenging economic environment.
Similarly, we had strong engine leasing results, and the RRPF JV with Rolls-Royce performed well. Two factors drove our decision to take up to revise our guidance description for the third quarter. First, as talked about in the last question, the secondary market remains strong. And second, as talked about on the last question, we earned more for managing the long-term lease portfolio that Brookfield owns than we expected to. So both of those reasons are driven by factors that have some lumpiness to them and so quantifying the exact amount that we might exceed the high end of the range is going to be dependent on the timing of future opportunities there, which is why we left it where we did.
Bob Lyons (President and Chief Executive Officer)
Yeah, Andre, it’s Bob. I’d also add too, with remarketing income, it gets a little bit more challenging to call that precisely in the fourth quarter because the buyer universe, they’re approaching their year-end as we are, but they may have different capital allocations that they can expend this year or they want to expend it in the first quarter. So, you know, we have to work with those potential buyers and at times try to recognize what their needs are and what their capital plans are.
So it gets a little bit more difficult to predict in the fourth quarter.
Andrew Tomczyk (Analyst at Goldman Sachs)
Understood. Thanks for the color. Was curious. On just the repricing runway of the acquired assets, you know, following the Wells Fargo integration, if you’re able to share maybe what percent of the acquired operating fleet has now repriced to the current market levels, how much is left to price or maybe sell in the secondary markets. And, you know, how does the embedded renewal pricing delta on that specific pool of cars compare to legacy GATX equipment?
Paul Chitterton (Executive Vice President and President of Rail North America)
Yeah, I’ll start first, Andre, by just saying the average term in the portfolio that we purchased was very similar to our own. So, you know, we’re going to renew the same amount of cars out of the joint venture that GATX would renew in a given year, 18,000 to 20,000 or somewhere in that range. So there’s no significant lumpiness to how that portfolio will renew. We haven’t disclosed or broken out the data with regards to the difference in their embedded lease rate and rollover versus ours.
And quite frankly, we’re managing the entire business as one. Our sales team doesn’t differentiate at all between a GATX-only owned car and a joint venture car because keep in mind also over time they’ll become wholly owned cars that, you know, we’re buying, that we’ll likely buy that joint venture down over time. So, you know, we’re not looking at it as two discrete fleets and certainly that’ll be even more the case going forward.
Andrew Tomczyk (Analyst at Goldman Sachs)
Understood and wanted to just touch, while we’re talking on Wells Fargo, the maintenance expense within North America, I think seemed to dip down sequentially. You know, last year I think it went up 2Q to 3Q. Could you just speak to, you know, how the synergies are tracking on the Wells Fargo integration and maybe any specifics on the maintenance, you know, runway as well?
Paul Chitterton (Executive Vice President and President of Rail North America)
Yeah, so really the story there is very consistent with what we’ve talked about over the last couple quarters. So in the near term we knew that we would be in a position to rationalize the third-party maintenance that’s being provided and to challenge the providers in a way that, as an owner of maintenance facilities ourselves, we can do that Wells Fargo couldn’t. And we’re seeing improvement in that area and continue to expect to see that going forward.
Andrew Tomczyk (Analyst at Goldman Sachs)
So the run rate that we’ve seen so far this year, you would expect to continue for the full year?
Tom Elman (Executive Vice President and Chief Financial Officer)
Yeah, and I think if you took our gross maintenance expense year to date and annualized it, you come up with $502 or $503 million. And our guide for the year back in January was about $500 million. So there’s some puts and takes between the wholly owned, you know, our legacy portfolio and the joint venture cars. But we’re coming in right in line with what we expected. And we had baked into that some of those synergies already that we’re realizing.
Andrew Tomczyk (Analyst at Goldman Sachs)
Thanks for that, and maybe just hitting a little bit on the secondary market activity within rail leasing. It does seem like that’s, you know, potentially driving the higher end of the range guidance as well, or above the higher end of the range. You know, that’s been an area of strength this year and over the recent years. I’m just curious if you could share sort of the types of the profiles of buyers, whether that’s institutional funds, shippers, or competing lessors that are, you know, providing liquidity there.
And then I know it’s probably a little early, but any indication on what we should anticipate for the pace of gains, you know, into 2027 as well? That’d be super helpful. Thank you.
Bob Lyons (President and Chief Executive Officer)
Yeah, Andre, good question. And we continue to see a really wide buyer universe. The breadth and depth is quite strong. If we’re putting a book out in the marketplace or one of our competing lessors is doing the same, you know, there’s a good list of 25, 30 different types of institutions. Other lessors is really the primary source. We occasionally will sell cars back to shippers. That happens at times, but it’s primarily that lessor universe, and it continues to be extremely robust.
One thing playing into that is, as we’ve talked about, is the supply dynamic in the marketplace right now. There’s not a lot of new cars on order. I think the expectation for this year is quite low from a cyclical standpoint in terms of new car orders. So if you’re an existing lessor with an established base of cars and you’re looking to add, you’re going to do it in the secondary market. And so we see ample opportunity, and really, we don’t see that abating anytime soon, absent some bigger macro factor.
Andrew Tomczyk (Analyst at Goldman Sachs)
Very helpful. And maybe just to close off for me, and sort of relatedly as well, I wanted to touch on the tariffs and how that’s impacting buyers’ decisions as well. I think the tariffs, you know, the idea is that they could elevate the new build replacement economics and the cost of a new car. So are buyers incrementally, you know, using that to tap the secondary market as well? Is that causing them to sort of delay new car orders as well? And do you see this dynamic sort of creating a floor for asset values here?
Paul Chitterton (Executive Vice President and President of Rail North America)
So, Andre, this is Paul speaking. And just to address that, I think it’s worth a little context here. So with respect to tariffs on new railcars, right now, the only railcars that are technically subject to tariffs are tank cars. So freight cars, which constitute the majority of the new car market, are not currently subject to any tariffs. And the tariff situation is fluid in the sense that there are Section 232 tariffs that have been imposed but not enforced, and then there are anti-dumping tariffs that are under discussion right now for tank cars.
So it’s a very fluid situation here right now. What I would say is, obviously, should tariffs be imposed, it would increase the cost of acquisition of tank cars. But GATX is actually extremely well hedged because, of course, it’s one of the largest owners of an installed fleet of tank cars. Effectively any increase in the cost to replace that fleet will improve the value of our installed fleet, and that should manifest through lease rates. So it’s an evolving situation. But I think that gives you a sense of where we are right now.
Andrew Tomczyk (Analyst at Goldman Sachs)
Thank you. Makes sense. Appreciate all the thoughts.
OPERATOR
Your next question comes from the line of Brendan McCarthy with Sudoti. Brendan, your line is now open. Please go ahead.
Brendan McCarthy (Analyst at Sudoti)
Great. Good morning, everybody. Thanks for taking my questions here. I wanted to start off on the Rail North America utilization rate, up about 40 basis points sequentially. I think we talked about the Wells portfolio having utilization of under 98%, maybe in the 97% range at acquisition date. I guess, are you seeing a benefit from better placement of cars? Or maybe it’s remarketing activity? And I guess, do you expect that utilization rate to continue to grind up back towards that 99% level?
Paul Chitterton (Executive Vice President and President of Rail North America)
So this is Paul speaking, and thank you for the question. Yes, we’ve had success placing idle cars out of the former Wells Fargo portfolio that’s in the joint venture, and really that’s what’s driving the improved utilization performance. And really what I would say is there aren’t necessarily any specific markets within any specific car types. It’s really been broad-based success with our team placing cars, and we would expect that success to continue.
We’ll still have the headwinds from the small-cube covered hopper fleet serving the sand market. So that will continue to be something of a utilization headwind. But I will say we’ve had good success even placing small cubes. Outside of the small cube market it’s been very positive and really trending, I would say, at least as well as we expected coming into this.
Brendan McCarthy (Analyst at Sudoti)
Got it. And on the remarketing income side, about $168 million year to date, is the expectation for any potential outperformance above that $200 million threshold? I guess you expect any outperformance to come from the legacy side of the fleet, or is the Wells side potentially going to go above that $70 million number?
Tom Elman (Executive Vice President and Chief Financial Officer)
Yeah. So obviously, as Bob mentioned earlier, we really try to think of this as a single portfolio, and that’s how we operate the business. But just based on the numbers that you’ve seen year to date, it’s more likely that the outperformance would be legacy cars as opposed to the JV cars.
Brendan McCarthy (Analyst at Sudoti)
Okay, understood. And I think last quarter you mentioned the Wells, the JV expected to contribute, you know, maybe double the original $0.20 to $0.30 EPS expectation for the year. Is that still, you know, a reasonable expectation for you?
Tom Elman (Executive Vice President and Chief Financial Officer)
It is. And really it’s driven primarily by what we talked about earlier in the call, which is the fees that are earned on the portfolio that Brookfield owns.
Brendan McCarthy (Analyst at Sudoti)
Okay, understood. And just last question on capital allocation. It looks like share buybacks were more outsized in the quarter. Obviously, leverage has remained in place and you’ve continued to—you exercised, I think, one of the joint venture options. I guess, how can we think about the buyback activity going forward? Is it going to be perhaps a larger source of capital going forward?
Tom Elman (Executive Vice President and Chief Financial Officer)
Yeah. So what I’ll do there is just reiterate the way we think about capital allocation, period. So we’ve mentioned many times, first and foremost, we really seek to make economically accretive investment. Right. With that, we’re very cognizant of the leverage and other credit metrics—you mentioned leverage staying even—and to maintain our strong investment-grade credit rating. And then we return excess capital to the shareholders. We regularly do that via the dividend and at times we supplement that with stock buybacks.
And really what’s happened this year is, despite a really strong investment year outside of the Wells Fargo Rail acquisition, we still expect to do about $1 billion of investment, but that is a little bit lower than what you’ve seen the last couple of years. So it’s not surprising you’d see a little bit more on the stock buyback side.
Bob Lyons (President and Chief Executive Officer)
Yeah, Brendan, it’s Bob. I’d just add too, I like to think we remain very disciplined around that capital allocation concept of three things, you know, the first being the investment. That’s what we believe shareholders invest in GATX for us to do, is to put capital to work in assets—accretive economics. Keep the balance sheet in good shape, keep leverage in good shape, and then return excess. So we revisit that concept constantly here at GATX.
Brendan McCarthy (Analyst at Sudoti)
Understood. I appreciate the detail. That’s all for—
OPERATOR
Your next question comes from the line of Justin Bergner with Gabelli Funds. Justin, your line is now open. Please go ahead.
Justin Bergner (Analyst at Gabelli Funds)
Good morning, Bob. Good morning, Tom. Good morning, Sherry. Morning, Paul as well. Couple clarification questions. You mentioned the 20 to 30 cents JV contribution. Is that inclusive of the extra benefit from managing the Brookfield assets, or would that extra benefit be on top of the 20 to 30 cents?
Tom Elman (Executive Vice President and Chief Financial Officer)
Yeah. Great clarification, Justin. Thank you. So, all along, we’ve been talking about the totality of the investment activity and related activity with that acquisition. So it includes the performance of the JV, the management fees earned from the JV, the incremental SG&A that we have in order to provide those services, and the fees earned from the Brookfield wholly owned portfolio. So it’s all of that together. And, Justin, the 20 to 30 is what we thought coming into the year. Back in July, we said it would be double that, and we’re very confident in that level. And year to date, it’s been in the range of 50 cents, so we’re well on the way.
Justin Bergner (Analyst at Gabelli Funds)
Oh, year to date it’s already at 50 cents. Okay, got it. So it was more consistent with the doubling you spoke about in July. Okay, that’s very helpful. And then just on the benefit from helping Brookfield sell their fully owned cars, I assume that that’s in that other revenue category of Rail North America. And are there any costs associated with it, or is it mostly drop-through to the bottom line, that revenue?
Tom Elman (Executive Vice President and Chief Financial Officer)
So there would be, but they’re a little difficult to tease out. It would be part of the incremental SG&A. So if you look at what we expected coming into the year, we said SG&A would be up about $30 million on a normalized basis versus a year ago, and we said the vast majority of that would be related to the Wells Fargo Rail acquisition and related activity. So all of that together is the cost side shows up in SG&A. Everything you see in that other revenue line related to the management fee activity is just the revenue side.
It’s not net of anything. And that SG&A is coming in about right where we thought it would come in. So we’re managing. The team’s managing that quite well.
Justin Bergner (Analyst at Gabelli Funds)
Okay. So not too much additional cost to generate that extra revenue for managing the Brookfield sales? Seems like.
Tom Elman (Executive Vice President and Chief Financial Officer)
Yeah. Justin, just to be sure you understand, the incremental SG&A we’re talking about is mostly related to the operating lease JV that we have with Brookfield, where we’re at 33.5% ownership. Yes, there is some additional incremental SG&A related to the long-term lease portfolio, but that would be relatively small.
Justin Bergner (Analyst at Gabelli Funds)
Okay, thank you for that. And then does that mean that you’re now getting management fees on a slightly smaller Brookfield fully owned fleet because you’ve helped sell a decent amount of cars? Okay, gotcha. Nice work. Overall, on the maintenance side, just to clarify, the maintenance benefits that you’re seeing near term from the Wells Fargo, those are more about better managing third-party maintenance? Are you actually starting to insource some of that maintenance already?
Paul Chitterton (Executive Vice President and President of Rail North America)
So, Justin, it’s Paul speaking. We have not yet insourced any of the joint venture maintenance. As we talked about coming into the year, our shops are really full of our own work, and so there really wasn’t much of an opportunity to do that. We are going to be laying the groundwork to be able to take in some of that joint venture work, and we’re hoping that at some point, potentially later next year, you’ll be able to see some of the benefits of that.
When we announced the transaction initially, we said it would probably be a two to three year period before, just because of the demand of our own fleet in our shops, we would likely be two to three years before we started to even move some of the joint venture cars into our maintenance network. And so we’re really digging in and putting the pieces in place to begin doing that on a modest level in 2027. But the expectation is we’ll step that up sequentially after next year.
Justin Bergner (Analyst at Gabelli Funds)
Okay, great. And maybe lastly, the Rail International performance seemed to improve nicely on a sequential basis. Could just be noise, but is there anything you wanted to highlight there in terms of what’s going well or what’s progressing as expected?
Tom Elman (Executive Vice President and Chief Financial Officer)
Yeah. So in general, we came into the year expecting a challenging economic environment, and indeed we’ve seen that. The team has done a really good job navigating through that. As we noted in the press release, there’s really two factors driving the comparison year over year. One is that the fleet has grown, thanks largely to the DB Cargo acquisition that we did last year. And then in addition to that, there is some FX benefit that we’ve seen.
Justin Bergner (Analyst at Gabelli Funds)
Okay, thank you for taking all my questions.
OPERATOR
Your next question comes from the line of Ben Moore with Citi. Ben, your line is now open. Please go ahead.
Ben Moore (Analyst at Citi)
Hi, yes, thanks so much for bringing me back in. Wanted to touch on interest rates, as it looks like maybe that’s been what’s driving some negative sentiment on your shares the last few months. And yet your fundamentals remain very strong. Your favorable supply-demand is much more of a meaningful driver in the short term within the year, as you’ve shared in the past. So it seems like that’s very much working. When we look at fed funds futures, it’s showing another 50 bps of hikes likely through the end of 2027, so likely maybe two more hikes.
Wanted to get your updated views on all of this. Are your fundamentals expected to continue to remain strong? You’ve got your debt size kind of and your leasing portfolio immunized. You’re using interest rate swaps to convert the floating to fixed. And then beyond the year we should see higher interest rates kind of play out as a benefit for you in higher lease rates. So wanted just to kind of get an overall update on your view of the picture on the interest rate headwind.
That’s more sentiment driven, whereas your fundamentals remain very strong.
Tom Elman (Executive Vice President and Chief Financial Officer)
Yeah. So, Ben, as you know, we certainly take a long-term approach to everything, and that includes the way we finance. Less than 10% of our debt is floating rate. We finance a wide variety of ways, but by far the biggest is accessing the capital markets with 10-year plus debt. So we have long-term debt, mostly fixed. And so the short-term impacts are not particularly meaningful to us because of the way we’ve structured the portfolio. You alluded to the fact that interest rates increasing can help lease rates. That is absolutely true. But similarly, that’s more of a long-run phenomenon as well. In the short term it’s always supply-demand dynamics that drive the lease rate market, market by market. But over a long enough period of time, you certainly should expect to see positive impact on lease rates with increasing interest rates. So at the same time that cumulative effect could impact GATX from a funding perspective, given the long-term way we fund, you would also see that benefit showing up in the lease rates.
So in the near term both are pretty insulated. In the long term they are correlated.
Bob Lyons (President and Chief Executive Officer)
Yeah, as we’ve always said, as a hard asset owner, and it’s the same for any hard asset owner, somewhat of an inflation element is a good thing and we benefit. We’ll take that benefit. Sure it raises the cost of a new car, but when you own 200,000 installed base, you get the benefit there far outweighs the increased cost on any incremental cars we’re bringing into the fleet. I think between Tom and I and Paul, we’ve all been here 30 years. I don’t think there’s any year ever during that period where we thought too much about near-term interest rates.
It’s not a driver of our business.
Ben Moore (Analyst at Citi)
Wonderful. Thanks so much for that color. And then just one last one from me on the engine leasing RRPF JV side, it looks like last quarter you had the very strong RRPF equity method earnings of roughly $50 million. This quarter it stepped down to roughly $46 million. And my sense is probably that’s more lumpiness than anything else. So I wanted to get your sense on that and what to expect for 4Q in that RRPF equity method and whether your full-year segment profit for engine leasing still holds.
Tom Elman (Executive Vice President and Chief Financial Officer)
Yeah, so actually the quarter-to-quarter variance that you mentioned is pretty stable for that business. Things do tend to move because of the gain on sales. One question we normally get, we didn’t this quarter, so I’ll just provide it anyway, is the split between operating income and remarketing income in that business. And both for the quarter and year to date it’s about two-thirds/one-third, two-thirds on the operating side, one-third on the remarketing side.
And that’s really what drives that variability. As far as the engine leasing segment, we do expect it to outperform beginning-of-year guidance consistent with the second quarter where we took guidance up. But it’s not being driven by the JV. It’s driven primarily by the GATX Engine Leasing wholly owned portfolio, and we talked about the reason for that last quarter and a strong maintenance reserve realization that we saw in the second quarter. The other thing to call out, Ben, is that in the third quarter of 2025 there was $10 million of pre-tax insurance proceeds related to engines in Russia, which we normalized.
Ben Moore (Analyst at Citi)
Thank you so much.
OPERATOR
We have reached the end of the Q&A session. I will now turn the call back to Sherry for closing remarks.
Bob Lyons (President and Chief Executive Officer)
Before Sherry closes, I just want to mention one thing. We talk often about how we’re economic animals at GATX and that includes everyone around the table. I also happen to be a lifelong Milwaukee Brewer fan. Before I walked in here somebody offered me $100 every time I offered up a baseball-related phrase on the call. So I just want to finish by saying we are hitting on all cylinders. Our commercial team continues to win by hitting singles and doubles and everyone on the team is contributing.
So by my count I just made $300. Thank you all for your time
Sherry Hellerman (Head of Investor Relations)
And I’d like to thank everyone for joining us this morning. Please feel free to reach out to me with any follow-up questions. Have a great day.
OPERATOR
This concludes today’s call. Thank you for attending. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.