Takeaways From Cowen’s 2Q20 Rail Equipment Survey

Written by Andrew Corselli
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“Order expectations by the shipper sub-group of railcar buyers were mixed. While a smaller percentage expects to order railcars, the certainty level about ordering has increased. Among railcar suppliers, we favor Trinity for the flexibility of its manufacturing/leasing model, and Greenbrier for its international diversification and cost cutting. GATX's lease terms offer it some protection.”

Those are the key takeaways from Cowen’s 2Q20 Rail Equipment Survey, which was authored by Cowen analysts Jason H. Seidl (Managing Director and Railway Age Wall Street Contributing Editor), Matt Elkott and Adam Kramer.

Two of the Four Demand Metrics We Measure Deteriorate Again; The Other Two Improve

“When it comes to order activity we consider four key metrics: (1) The percentage of “all participating shippers” who will or may order railcars,” the analysts noted. “(2) The conviction level about ordering—the split between “yes” and “maybe”—within this “all participating shippers” group. (3) The percentage of “same shippers” who will or may order railcars. (4) The conviction level about ordering—the split between “yes” and “maybe”—within this “same shippers” group. In our prior quarterly survey, all four metrics deteriorated. In the 2Q20 survey, the first and third metrics deteriorated again, while the second and fourth improved somewhat.”

Percent of Total Shippers Planning Orders Down

“Roughly 40% of all shippers surveyed said they will or may order railcars in the next 12 months,” the analysts said. “This compares to 47% in our 1Q20 survey. About 60% now say they do not plan to order railcars, compared to 54% in our prior quarter survey. Within the 40% of total shippers who are contemplating orders in the next 12 months, 57% said “yes,” they plan to place orders (53% in 1Q20), while 43% said “maybe” (47% in 1Q20). This points to an increased level of certainty about ordering within the total shipper group relative to last quarter.”

Percent of Same Shippers Planning Orders Down

“On a same-shipper basis, about 37% of same shippers in 2Q20 said they will or may order railcars, compared to 43% in 1Q20,” they said. “Roughly 62% do not plan to order railcars, compared to about 56% in 1Q20. Within the 37% of same shippers who are contemplating orders in the next 12 months, 62% said “yes,” they plan to place orders (44% in 1Q20), while 38% said “maybe” (56% in 1Q20). This points to an increased level of certainty about ordering within the same shipper group relative to last quarter.”

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