Cowen and Company

Cowen: “COVID-19’s Had as Large of an Effect as the Great Recession”

“Permanent changes in trade flows will likely cause the Port of LA to permanently lose about 15% of its market share to Gulf and East Coast ports, a clear negative for Union Pacific but favorable for CSX, Kansas City Southern and Norfolk Southern. COVID-19 has had as large of an effect as the Great Recession. Peak season expectations were mixed to positive, with retail inventory replenishment likely needed.”

Cowen: “Cash For Clunkers,” Spot Lease Rate Recovery and Other Observations

“A resuscitation of a long-futile push for railcar scrappage tax subsidies may be under way. While the effort is in its infancy, and the outcome remains speculative, we see success as less of a long shot than it has been at any time in the past. This would be positive for railcar suppliers, including Trinity and Greenbrier, and metals companies such as Schnitzer Steel, Commercial Metals Company, Nucor Corporation and Steel Dynamics.”

Cowen: “Concerns Around KSU’s Concession in Mexico Are Overblown”

“We view concerns around Kansas City Southern’s concession in Mexico as overblown. The exclusivity provision cannot be revisited until 2027 and the concession remains in effect for 20 years after that. Further, KSU is improving its operations via PSR, which should aid Mexico as reliable rail service is likely to be a necessity for the country as it grows its manufacturing base. Reiterate Outperform.”

Takeaways From Cowen’s 2Q20 Rail Equipment Survey

“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.”

Takeaways From Cowen’s 2Q20 Rail Shipper Survey

“Shippers expect rail price increases of 2.3%, up 40bps sequentially, above rail cost inflation, but well below the survey’s average. Economic expectations are all higher sequentially; some remain below the survey’s average while some are very positive indicators. With PSR cost-cutting, growth opportunities and the ability to capitalize on supply chain near-shoring, Kansas City Southern remains our top rail pick.”

Takeaways From Cowen’s Rail Equipment Conference Call

“Railcar inquiries are largely in line with—if not slightly better than—the anemic levels seen two months ago. Translation into orders remains slow. Lease rates are still depressed, with no signs of improvement. Secondary market valuations appear to have eased. Locomotive upgrades could prove resilient. We’re constructive on Wabtec, Trinity and Greenbrier, but the latter two could see near-term pressure.”

“IN PANDEMIC FIGHT, PUBLIC TRANSIT IS PART OF THE SOLUTION, NOT THE PROBLEM”

OK, I’ll give you one guess as to who said this. Hints: It’s not APTA or the Eno Center for Transportation. It’s not one of the giant public transportation agencies like the New York MTA or NJ Transit or CTA or WMATA or Los Angeles Metro. It’s not one of the huge engineering consulting firms like WSP USA, AECOM or Parsons. It’s not a transit car builder like Alstom, Siemens or Bombardier. It’s not even Contributing Editor David Peter Alan, whose passion for rail transit has generated tens of thousands of words for the Railway Age website. Give up?

Takeaways From Cowen’s Rail Equipment and Crude Oil Tank Car Call

“Storing oil in tank cars may be theoretically possible, but logistical, economic and regulatory hurdles make it unviable. Railcar lease rates could be 25-30% below 2019. Manufacturing inquiries have continued, but prospective buyers are in no rush to pull the trigger.” Those are the key takeaways from a conference call moderated by Cowen and Company Freight Transportation Analyst Matt Elkott. Among the industry experts participating were Railroad Financial Corp. President and Railway Age Financial Editor David Nahass, National Steel Car Senior Vice President Marketing and Sales Bob Pickel, and Oliver Wyman Vice President Jason Kuehn.