Reporting on Cowen and Co.’s just-concluded 10th Annual Global Transportation Conference, analyst Matt Elkott said that railcar demand recovery is “likely sustainable but not at the same level as second-quarter 2017.” Cowen is projecting third-quarter 2017 orders for 9,400 units, below the second quarter’s 12,000 but significantly higher than the first quarter’s 4,800 and similarly low prior levels.
Cowen and Company is “not as concerned as many investors are about slowing volume growth,” says Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl. Though North American Class I carloads have been down for each of the past two years, volumes “have snapped back through August,” up 5% year-to-date.
Canadian Pacific Railway reported record second-quarter earnings on across-the-board improvements and ongoing volume gains through the first half of the year.
Based on responses to Cowen and Company’s Second Quarter 2017 Rail Equipment Survey, the percentage of shippers who will or may order railcars is flat compared to 1Q2017, “but the conviction level about ordering rose meaningfully,” says analyst Matt Elkott.
According to Cowen and Company’s Second-Quarter 2017 Rail Shipper Survey, respondents are anticipating price increases of 3.0% over the next 6-12 months, up 40 basis points from 2.6% in Cowen’s 1Q17 survey and the highest level since 4Q15.
Demand for new freight cars is on the rise, and builders appear to be aggressively using pricing tools to take advantage of the recovery and retain or increase market share, according to market research conducted by Cowen and Company analyst Matt Elkott.
Cowen and Company’s First-quarter Rail Shipper and Rail Equipment Surveys indicate general optimism about a business environment that appears to be recovering and is “slightly positive” for railroads, say Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl and Vice President Equity Research Matt Elkott.
Cowen and Company analyst Matt Elkott has upgraded American Railcar Industries (ARI) to Outperform from Market Perform, “as earnings and fundamentals have not only remained stable but improved further on the frac sand front. Our confidence in our above-consensus estimates has grown, and our channel checks suggest rising interest in lease fleets. Meanwhile, valuation has compressed over the same period. Our new PT is $45 (16.5x our 2018 EPS estimate) vs. $44 previously.”
Reporting on Rail Equipment Finance 2017, Cowen and Company analyst Matt Elkott notes, “Sentiment is better than last year, but we sensed this is only in small part based on fundamentals and in large part on hope associated with potentially more business-friendly policies and an infrastructure bill. We also noticed a rise in the number of international investors. We continue to believe a material pickup in railcar demand and lease rates is unlikely before late 2017/early 2018.”
The percentage of shippers planning to order railcars ticked down for the second consecutive quarter, but on a same-shipper basis, the percentage increased modestly, and the conviction level about ordering strengthened, according to Cowen and Company’s Third-Quarter 2016 Rail Equipment Survey.
