FreightCar America 2Q22: ‘Solid Results, Superior Margins, Robust Backlog’ (UPDATED, Cowen Insight)Written by William C. Vantuono, Editor-in-Chief
FreightCar America (FCA) posted a strong second-quarter 2022 and raised its revenue and delivery outlook for fiscal year 2022.
For the quarter ended June 30, 2022, FCA’s consolidated revenues were $56.8 million, compared to $37.4 million in second-quarter 2021. The company delivered 468 railcars, compared to 313 in the prior-year period. Net income was $14.5 million, or $0.58 per share, compared to a net loss of $4.2 million, or –$0.24 per share, in second-quarter 2021. Net income/loss for the current and prior periods included non-operating items that impacted results, including an $18.7 million non-cash gain related to the change in fair market value of warrant liability and a $2.8 million non-cash gain for stock-based compensation in second-quarter 2022. In second-quarter 2021, there was a non-cash gain of $3.5 million related to the change in fair market value of warrant liability.
FCA’s adjusted EBITDA for second-quarter 2022 was $2.3 million, compared to an adjusted EBITDA loss of $3.1 million in the prior-year period.
FCA ended the quarter with a backlog of 2,972 railcars with an aggregate value of approximately $320 million. The company raised its full-year 2022 revenue outlook to between $340 million and $360 million and its delivery outlook to between 3,000 and 3,200 railcars.
“FreightCar America reported solid results in the second quarter, recording positive Adjusted EBITDA on just 468 railcars due to planned line changeovers that temporarily curtailed production,” said President and Chief Executive Officer Jim Meyer. “The changeovers went smoothly and according to plan, and these results demonstrate our ability to generate superior margins even while producing far fewer units and against the continuing backdrop of high steel costs. For the balance of the year, we expect to produce upwards of 2,000 railcars. Our work to expand the Castaños (Mexico) facility continues, and we believe that we are well on our way to building a world-class manufacturing footprint in Northern Mexico with equal focus on product flexibility, quality and low cost. At the same time, our commercial team remains focused on growing our business in a margin-accretive manner.”
“We executed on our strategic and financial objectives in the second quarter, and while our production year-to-date was largely in line with our internal expectations, we are expecting a significant uptick in units delivered for the balance of fiscal 2022,” noted Chief Financial Officer Mike Riordan. “Due to stronger levels of order activity and a robust backlog, we are raising our previously stated 2022 outlook.”
Cowen Insight: “Progress Continues, Manufacturing Upcycle Intact”
“FreightCar America (RAIL) reported solid 2Q22 results and beat our EBITDA estimate by 15%,” reports Cowen and Company Transportation Equipment Analyst Matt Elkott. “Low-end and high-end of 2022 revenue and delivery guidance were increased, and the order outlook remains favorable. Our 2022 EBITDA estimate is unchanged, but we are raising our 2023 EBITDA estimate modestly to reflect the company’s solid margin performance and a positive production outlook.
“2Q22 adjusted EBITDA was $2.3MM, beating our estimate of $2.0MM and matching consensus estimate of $2.3MM; 2Q revenue of $56.8MM missed our and consensus estimates of $60.9MM and $72.9MM, respectively. We are maintaining our 2022 EBITDA estimate of $12MM and raising our 2023 EBITDA estimate to $23MM, from $21MM. Our price target rises from $4.32 to $6.00, based on the same 18x multiple applied to our new 2023 EPS estimate of $0.33, previously $0.24.
“Gross margins are expected to take a modest step down in 2H22 to more normalized levels after posting a double-digit result for 2Q. The expected margin moderation is due to a less-favorable product mix in 2H compared to 1H. Gross margin in 2Q exceeded our and consensus estimates of 9.5% and 10.5%, respectively, coming in at 11.6%. This marks the third sequential quarterly gross margin improvement and the second consecutive double-digit margin.
“Deliveries of 468 were down Q/Q and missed our expectation of 512 deliveries. The relatively low deliveries were in part due to expected changeovers on both production lines during 2Q. The company anticipates a significant sequential increase from 1H22, as the major changeover activity is largely completed. We are modeling for 1,955 units of deliveries in 2H22, up from 1,251 units in 1H22. This brings our full-year production estimate to 3,206 units, around the high end of the company’s updated guidance. The quarterly cadence of deliveries in 2H22 should reflect fairly equal distribution, with a modest increase in 4Q due to the incremental impact of the third production line going live in the quarter.
“RAIL raised its FY 2022 revenue guidance range from $320MM-$340MM to $340MM-$360MM, compared to our and consensus estimates at the time of the earnings release of $326.1MM and $340.9MM, respectively. Our revised revenue estimate is $363.6MM. FY 2022 railcar delivery guidance was also raised from a range of 2,800-3,000 units to 3,000-3,200 units, compared to our estimate at the time of the earnings release of 2,910 units. Our revised delivery estimate is 3,206 railcars.”