Tuesday, October 17, 2017

Cowen railcar survey “largely neutral”

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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.

The results of the survey are largely neutral for new railcar demand in the next 12 months,” said Elkott. Cowen considers several key ordering activity metrics: The percentage of responding shippers who will or may order railcars, and the conviction level about ordering (the split between “yes” and “maybe”) within that group; and the percentage of “same shippers” who will or may order railcars, and the conviction level about ordering within that group.

Of these metrics, the only one that didn’t deteriorate—the percentage of “same shippers” who will or may order railcars—is the one that carries the most weight in evaluating the quarter-over-quarter change in demand outlook. “Additionally, shippers appear to be more concerned about equipment availability now than they were in our 2Q17 survey, and their expectations of their own business growth improved,” Elkott noted.

Approximately 41% of responding shippers said they will or may order railcars in the next 12 months, down modestly from 45% in Cowen’s 2Q17 survey. About 59% said they do not plan to order railcars, up from 54% in the prior survey. Of those contemplating orders, 54% said “yes,” they plan to place orders (75% in 2Q17), while 46% said “maybe,” compared to 25% in 2Q17. “This points to a decreased level of certainty about ordering relative to last quarter among all participating shippers,” Elkott said.

On a same-shipper basis, which compares only the responses of shippers who participated in both the 3Q17 and 2Q17 surveys, the results “look more encouraging,” Elkott noted. About 42% said they will or may order railcars, compared to 32% in 2Q17. Roughly 58% do not plan to order railcars, compared to 68% in 2Q17. Of those contemplating orders in the next 12 months, 38% said they plan to place orders, compared to 71% in 2Q17, while 63% said “maybe,” compared to 29% in 2Q17. “This points to a decreased level of certainty about ordering relative to the prior quarter,” Elkott said.

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