Cowen and Company revealed three factors that could position railcar lessors well in the intermediate to long-term: Financial investors looking for hard, yield-generating assets amid further interest rate declines; partial, lease-term-driven insulation; and “our view that lease rates will be first to rebound in the rail equipment market when a freight recovery occurs.”
Cowen and Company revealed its rail-earnings takeaways, which saw the rails tout pricing despite weak volumes in 4Q. However, Cowen said it believes “that the effects of the Coronavirus on supply chains are not fully appreciated, with contacts telling us that Asian ports are at 40-50% operational capacity—railroad most at risk is Union Pacific. CN’s network is nearly shut down because of pipeline protesters and could lag the group near-term. We continue to favor Kansas City Southern among the rails.”
Cowen and Company released its quick take on Wabtec’s earnings update, and noted the company has “fairly solid guidance for what could be a tough earnings year.”
Cowen and Company recently released its Railcar Industry Forecast, which predicts 21% and 9% declines in deliveries and orders, respectively, this year.
Class I railroad capital expenditures “could decline by high single-digits to mid-teens this year,” Cowen and Company freight transportation analyst Matt Elkott notes in a Jan. 30 report, “but it is not all bad news,” at least for one supplier.
Three recently released Cowen and Company reports—Fourth-Quarter 2019 Rail Equipment Survey and Rail Shipper Survey, and Rail Estimates—indicates that, though times are tough and rail freight traffic in most sectors has not begun to recover, “the sky isn’t falling.” Here’s what Cowen Managing Director and Railway Age Wall Street Contributing Editor Jason H. Seidl, along with analysts Matt Elkott and Adam Kramer, see it.
According to Cowen and Company freight transportation analysts Jason Seidl (Managing Director and Railway Age Wall Street Contributing Editor), Matt Elkott and Adam Kramer, inquiries about new railcars appear to have risen slightly in the past month, while locomotive modernizations should remain solid, in the midst of a continuing weak new-build market. Industry-wide Precision Scheduled Railroading implementation has not been tested in a volume growth environment.
Reporting on the Cowen and Company Global Transport Conference in Bosto, Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl and analysts Matt Elkott and Adam Kramer offer these observations taken from the conference’s railcar/locomotive builder and Class I railroad panels, with a large trucker and a logistics/LTL company added for deeper perspective:
A looming U.S. economic recession—just look at freight rail traffic figures from the past six months—and “cyclical industrial fears” have significantly impacted rail equipment equities, creating opportunities for long-term investors with what Cowen and Company analysts Matt Elkott, Jason Seidl (Railway Age Wall Street Contributing Editor) and Adam Kramer describe as “quality companies with self-forged narratives” like Wabtec, Trinity and Greenbrier.
Two 2Q19 surveys of rail shippers on pricing/service quality and equipment needs conducted by Cowen and Company analysts Jason Seidl (Managing Director and Railway Age Wall Street Contributing Editor), Matt Elkott and Adam Kramer indicate that, compared to 1Q19, Class I railroad customers are anticipating somewhat lower rate increases, and little change in demand for new railcars.