Greenbrier Completes ARI Acquisition
The Greenbrier Companies, Inc. (GBRX) recently completed its acquisition of the manufacturing business of American Railcar Industries (ARI) from ITE Management LP (ITE).
ARI
Greenbrier acquiring ARI
In a transaction valued at $400 million, the Greenbrier Companies, Inc. (GBRX) has entered into an agreement to acquire the manufacturing business of American Railcar Industries (ARI) from ITE Management LP (ITE), the hedge fund that bought ARI from investor Carl Icahn in December 2018. GBX said the result will be “a larger U.S. railcar manufacturing footprint, adding ARI’s two manufacturing facilities in Arkansas. It will employ more U.S. workers at cost-competitive and flexible facilities, with a more-efficient delivery model throughout North America, due to lower transportation costs.”
Tank car building surge imminent: Cowen
An estimated 64,000 DOT117J (new) and DOT117R (retrofit) tank cars will be produced over the 2019-2022 time frame as confidence grows in a tank car demand resurgence, according to Cowen and Company analyst Matt Elkott.
Commentary
Tank railcar market continues to evolve
Financial Edge, September 2018: According to the good people at Railinc (a perennial speaker at the annual Rail Equipment Finance Conference, www.railequipmentfinance.com), as of July 1, 2018, 12,581 tank railcars had been retrofit to the DOT117R standard. In the first seven months of 2018, 5,349 tank railcars were retrofit (an average of 764 per month). If retrofits continue at the same pace for the remainder of the year, the total number of retrofit cars completed in 2018 would be more than double the total number of retrofits completed by the end of 2017.
Freight car market: Strength in numbers
Mostly solid quarterly financial results and a spate of new orders for freight car builders show a market that’s stable and growing.
Railcar demand “net neutral”: Cowen survey
The results of Cowen and Company’s 2Q18 Rail Equipment Survey “are mixed and largely neutral on the balance,” reports Cowen analyst Matt Elkott. “Shippers’ level of certainty about ordering railcars increased, but order sizes decreased.”
Railcar inquiries remain elevated: Cowen and Co.
Reporting on Cowen and Co.’s just-concluded 10th Annual Global Transportation Conference, analyst Matt Elkott said that railcar demand recovery is “likely sustainable but not at the same level as second-quarter 2017.” Cowen is projecting third-quarter 2017 orders for 9,400 units, below the second quarter’s 12,000 but significantly higher than the first quarter’s 4,800 and similarly low prior levels.
Rising railcar demand prompts aggressive pricing: Matt Elkott
Demand for new freight cars is on the rise, and builders appear to be aggressively using pricing tools to take advantage of the recovery and retain or increase market share, according to market research conducted by Cowen and Company analyst Matt Elkott.
Matt Elkott: Increased interest in lease fleets, improved frac sand outlook favorable to ARI
Cowen and Company analyst Matt Elkott has upgraded American Railcar Industries (ARI) to Outperform from Market Perform, “as earnings and fundamentals have not only remained stable but improved further on the frac sand front. Our confidence in our above-consensus estimates has grown, and our channel checks suggest rising interest in lease fleets. Meanwhile, valuation has compressed over the same period. Our new PT is $45 (16.5x our 2018 EPS estimate) vs. $44 previously.”
Takeaways from REF 2017: Matt Elkott
Reporting on Rail Equipment Finance 2017, Cowen and Company analyst Matt Elkott notes, “Sentiment is better than last year, but we sensed this is only in small part based on fundamentals and in large part on hope associated with potentially more business-friendly policies and an infrastructure bill. We also noticed a rise in the number of international investors. We continue to believe a material pickup in railcar demand and lease rates is unlikely before late 2017/early 2018.”