Author: Matt Elkott

Matt Elkott

Cowen: GATX ‘Improving Return Dynamics’

GATX has taken advantage of low interest rates over the past few years to improve its debt profile, which is currently 90% fixed, with an average maturity of 10 years. Meanwhile, spot lease rates are expected to continue their seven-quarter run of sequential growth. This should lead to progressively higher returns for the company, which is now likely to focus on locking into much higher lease terms.

Rail Equipment Conference Call Takeaways: Cowen

On May 31, we held a discussion with five expert panelists who provided insights into the current state and outlook of the rail, locomotive and railcar leasing and manufacturing markets. Overall, railcar demand recovery has been driven largely by freight cars, but our panelists indicated that tank car utilization and rates are rising. If this continues and eventually leads to higher tank builds, it could be a margin tailwind for manufacturers. As for the broader railcar market, inquiries remain strong, but labor and disruptions could limit production. Locomotive upgrades remain solid.

Matt Elkott

Cowen: Wabtec Investor Day Insight

March 9 was Investor Day for Wabtec (WAB), and its five-year margin target is ahead of consensus for the next three years (the maximum available). Revenue and EPS targets are not inconsistent with Street expectations. Cowen and Company believes WAB’s geographic breakout could position it well as some rail commodities shift from Russia to other world regions.

For Railcar Buyers, Time to Pull the Trigger, Soon

Takeaways from Cowen and Company’s recent Rail Equipment Webinar show that locomotive upgrades remain solid, as traffic growth continues. Elevated inquiries for newly built railcars should begin to translate into orders gradually, despite the steel premium. Lessors are well-positioned as freight demand rises, railcar supply decreases and new builds fall short of replacement levels this year.

For 2020, 2021, and 2022, we are projecting railcar deliveries of 32.2K, 35.9K and 36.2K units, respectively.

The Cowen Insight: OEM Earnings, Railcar Demand

At Cowen and Company, we are revising our transportation OEM and machinery earnings estimates for fourth-quarter 2020 and 2021, and introducing our 2022 estimates; updating our North American Class 8 production forecast; and fine-tuning our railcar supply demand model. What are we seeing? Gradually improving supply-side dynamics.

Matt Elkott, Cowen and Company OEM Transportation Analyst

Greenbrier ‘Ready for a Railcar Demand Recovery’: Cowen

At Cowen and Company, we expect North American railcar demand to recover in 2021. One of the best-positioned suppliers? The Greenbrier Companies (GBX), with more than a 40% manufacturing share following the acquisition of ARI. Railcar markets in Europe and Brazil are also improving. All of this plus the cost-cutting measures GBX has taken make it our top 2021 pick.