Railcar market recovery remains intact: Cowen
Written by William C. Vantuono, Editor-in-Chief
A Canadian Pacific Railway crude oil train Stephen C. Host photo.
Cowen and Company’s 3Q18 rail equipment survey indicates that the railcar market recovery remains intact, even though the survey’s results were “somewhat mixed,” according to analyst Matt Elkott. The percentage of shippers planning to order railcars “inched up very slightly, while order sizes decreased a bit. We expect strong 3Q18 orders, driven partly by crude tank car and intermodal equipment demand.”
“The results of the survey point to continued strength in railcar demand, but do not necessarily show signs of further acceleration in the ongoing recovery,” said Elkott.
Cowen considers four key metrics: The percentage of “all participating shippers” who will or may order railcars, and their conviction level about ordering (the split between “yes” and “maybe”); and the percentage of “same shippers” who will or may order railcars, and their conviction level. The first, second, and third metrics improved in 3Q18, while the fourth metric declined.
“Shippers expect to place smaller orders relative to our prior survey,” said Elkott. “Among the shippers who said they don’t plan to order railcars in the next 12 months, the percentage who said it is because they don’t have incremental equipment needs increased slightly.”
About 57% of all shippers surveyed said they will or may order railcars in the next 12 months, compared to 55% in Cowen’s 2Q18 survey. About 44% said they do not plan to order railcars, compared to 45% in the prior quarter survey. Within the 57% of total shippers who are contemplating orders in the next 12 months, 65% said yes, they plan to place orders, compared to 59% in 2Q18), while 35% said maybe, compared to 41% in 2Q18. “This points to a somewhat increased level of certainty about ordering relative to the prior quarter among all participating shippers,” noted Elkott.
On a same-shipper basis, about 48% in 3Q18 said they will or may order railcars, compared to 47% of same shippers in 2Q18. Roughly 52% do not plan to order railcars, compared to 53% in 2Q18. Within the 48% of same shippers who are contemplating orders in the next 12 months, 56% said they plan to place orders, compared to 75% in 2Q18, while 44% said maybe, compared to 25% in 2Q18. “This points to a decreased level of certainty about ordering within the same shipper group relative to the prior quarter,” said Elkott.
