Is trucking as good as it gets? “June was great for truckers, and the start of July has been just as good,” says Cowen and Co. Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl. “It remains a strong trucking market, and capacity is extremely tight. That being said, things can continue going well, but we question just how much better it can get.”
Analyst Cowen and Co. this week hosted its quarterly rail equipment conference call with expert panelists across the industry spectrum.
Cowen and Company Equity Research Analyst Matt Elkott, who covers the railway supply sector, on May 4 issued a report that looks favorably upon two potential combinations: Trinity and GATX, and Wabtec and GE Transportation.
Parallel first-quarter 2018 surveys conducted by Cowen and Company with rail shippers, and with shippers who own or lease railcars, indicate that the market is “generally positive” for railroads and railcar manufacturers.
Cowen and Company analysts Matt Elkott and Matthew Frankel are projecting a 20% sequential jump in freight car orders in the first quarter to 10,200 units (up 20% from the fourth quarter’s 8,500 units), since “buyers may preempt an acceleration in the steel price rally.”
Norfolk Southern Corp. reported third-quarter net income of $506 million, up 10% on-year, as income from railway operations increased 11% to $911 million and the operating ratio fell to a quarterly record 65.9%. Earnings per share totaled $1.75, up 13% from the previous year.
The results of Cowen and Company’s Third-Quarter 2017 Railcar Survey are a “net neutral,” based on several factors, according to Vice President Matt Elkott. The percentage of shippers responding to the survey planning to order railcars in the next 12 months declined slightly, but increased on a same-shipper basis, “which is a more relevant metric for measuring quarter-over-quarter changes in demand outlook.” As well, the level of certainty about ordering declined.
Railroad shippers are anticipating price increases averaging 3.2% over the next 6-12 months, according to Cowen and Company’s Third-Quarter 2017 Rail Shipper Survey. This is a 20 basis point sequential increase from 3.0% in Cowen’s 2Q17 survey.
Two shipper surveys, one on railcars, the other on rail service, conducted by Cowen and Company at the Sept. 26-28 Northeast Association of Rail Shippers (NEARS) 2017 annual conference indicated mostly favorable results for the industry.
Freight car industry interests who participated in a discussion panel at Cowen and Company’s 10th Annual Global Transportation Conference in Boston offered their observations on a wide range of topics affecting the market. Among them: the recent uptick in railcar orders, lease rate recovery prospects, new capital flowing into the market, railcar demand recovery sustainability, and railroad traffic volume growth.
