Among Class I railroads, BNSF was rated highest in service quality, according to a fourth-quarter 2018 survey of rail shippers conducted by Cowen and Company analysts Jason Seidl (Managing Director, and Railway Age’s Wall Street Contributing Editor), Matt Elkott and Adam Kramer.
Cowen and Company
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.
Cowen and Company’s 3Q18 rail shipper survey says that shippers are anticipating price increases of 3.7% over the next 6-12 months, down from 4.7% in 2Q18, but in line with the survey’s long-term average, according to Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl.
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.”
Inquiries and orders for new railcars remain robust, with strength in tank cars, intermodal equipment, box cars and steel gondolas, and the locomotive new-build market appears set for a gradual rebound, report Cowen and Co. Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl, and Cowen Vice President Matt Elkott from the firm’s annual Transportation Conference. “This reinforces our confidence in our 3Q18 forecast of 20,500 units in industry orders,” they said. CBR (crude by rail) could enjoy relative strength through 2022. We continue to favor Wabtec, Trinity, Greenbrier, and ARI.”
Genesee & Wyoming’s second-quarter 2018 adjusted EPS (earnings per share) of $0.94 “was at the high end of guidance and just ahead of our and consensus expectations,” according to Cowen and Co. Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl. “The company enjoyed freight demand improvement in all geographies, something that should begin to translate into operating leverage in the second half. Full-year guidance was largely in line with that provided last quarter. We’re raising our estimates and target and maintaining our Outperform rating.”
Norfolk Southern hit new highs for operating income, operating ratio, net income and earnings per share in this year’s second quarter. Net income was $710 million, up 43% year-over-year, a result of an 18% increase in income from railway operations and a lower effective income tax rate. Diluted EPS was $2.50, up 46% year-over-year and a second-quarter record.
An improving U.S. rail market helped second-quarter earnings at GATX Corp., despite industry-wide railcar oversupply and pressure on car lease rates.
The results of Cowen and Company’s 2Q18 Rail Shipper Survey “are positive for the railroads,” according to Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl. With anticipated rate increases of 4.7% over the next 6-12 months, up from 3.8% in Cowen’s 1Q18 survey—the second-highest sequential increase in this survey’s history—market share “is moving from the highway to the rails and may pick up in the second half of the year if rail service improves.”
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.”