Cowen and Company


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.

UP 1Q2020: “Well-Equipped to Make It Through Terrible Near-Term Freight Conditions”

Union Pacific reported an all-time best operating ratio of 59% in 2020’s first quarter, based on net income of $1.5 billion, or $2.15 per diluted share. This compares to $1.4 billion, or $1.93 per diluted share, in first-quarter 2019. “Against the backdrop of the emerging COVID-19 pandemic and a challenging volume environment, we leveraged productivity to deliver strong financial results,” said Chairman, President and CEO Lance Fritz. “We also made substantial improvement in employee safety, which is a testament to our dedicated employees. Our rail network has never run better, providing a safer, more reliable and efficient service product to our customers.”

Rail Tank Cars As Oil Storage “Unlikely For Now”: Cowen

Cowen and Company Freight Transportation Analyst Matt Elkott estimates that there is readily available tank car storage capacity for at least 25 million barrels of crude, which can be ramped up in the coming weeks. However, the Canadian railroads do not appear to have a strong appetite for this business, while their U.S. counterparts may be examining the prospects.

Cowen Shipper Surveys in a COVID-19 Environment Show Declining Expectations

The results of Cowen and Company’s 1Q20 Rail Equipment and Rail Shipper Surveys, conducted by Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl, with Airfreight and Surface Transportation Analysts Matt Elkott and Adam Kramer, indicate declining railcar order and pricing expectations. Following are summaries:

Cowen: “Hard Assets For Hard Times”

Cowen and Company revealed three factors that could position railcar lessors well in the intermediate to long-term: Financial investors looking for hard, yield-generating assets amid further interest rate declines; partial, lease-term-driven insulation; and “our view that lease rates will be first to rebound in the rail equipment market when a freight recovery occurs.”

Cowen Touts Class I “Resiliency”

Cowen and Company revealed its rail-earnings takeaways, which saw the rails tout pricing despite weak volumes in 4Q. However, Cowen said it believes “that the effects of the Coronavirus on supply chains are not fully appreciated, with contacts telling us that Asian ports are at 40-50% operational capacity—railroad most at risk is Union Pacific. CN’s network is nearly shut down because of pipeline protesters and could lag the group near-term. We continue to favor Kansas City Southern among the rails.”