Cowen and Company

Cowen: Adjusting the Tracks for 2Q22

At Cowen and Company, we are adjusting our railroad estimates ahead of second-quarter 2022 earnings. Continued rail congestion is hindering volume (still below 2019 levels), while pricing is expected to be on par with first-quarter levels.

Cowen State of the Ports Conference Call: ‘Railroads the Largest Coming Bottleneck’

Widely reported excess freight from China due to shutdowns appears over-hyped, and a potential upcoming backlog (which is expected to arrive in the last week of June) is likely from inventory pull-forward, equipment challenges, and a challenged rail network. Our panelists—the head of a West Coast port, the CEO of a drayage company, and the CEO of a container consolidator and intermodal company— were bullish of 2022, but expect softness in 2023. Consumers continue to lean into “Dinner and Disney” in a spending shift.

Rail Equipment Conference Call Takeaways: Cowen

On May 31, we held a discussion with five expert panelists who provided insights into the current state and outlook of the rail, locomotive and railcar leasing and manufacturing markets. Overall, railcar demand recovery has been driven largely by freight cars, but our panelists indicated that tank car utilization and rates are rising. If this continues and eventually leads to higher tank builds, it could be a margin tailwind for manufacturers. As for the broader railcar market, inquiries remain strong, but labor and disruptions could limit production. Locomotive upgrades remain solid.

Greenbrier: Order Activity Remains Healthy

We hosted virtual investor meetings and a group call with Justin Roberts, Greenbrier’s Vice President Corporate Finance and Treasurer. North American demand remains solid, and the production ramp-up appears set to occur without additional disruptions. In Europe, the Ukrainian conflict seems to have caused transitory headwinds, which, we believe, could create noise. We remain constructive but are slightly cautious in the near term.

Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl

Potential Modal Shifts as Diesel Stays Hot: Cowen

U.S. diesel pricing remains elevated, passing along significant costs to shippers via fuel surcharges. At Cowen and Company, we believe sustained high diesel pricing will ultimately benefit the railroads and IMCs (intermodal marketing companies) as shippers explore different modes of transport.

Suds With Seidl: ‘Rail Service Severely Challenged’

We hosted another Suds with Seidl event featuring leaders across the railroad industry. Rail service continues to be severely challenged, although there have been some slight improvements in recent weeks. Rails continue to have tremendous pricing freedom, and are capitalizing despite service metrics. Intermodal demand remains high, although the recent Blume Global supply chain management platform cyberattack outage has impacted service.

Wabtec 1Q22: ‘Strong’ Results, Backlog Grows

Wabtec Corp. posted “strong” first-quarter 2022 financial results, despite “rising costs, continuing supply disruptions and the impact on our business due to the conflict in Ukraine,” President and CEO Rafael Santana reported on April 27.

“Robust order activity, strong liquidity and the evolution of our leasing business continues to strengthen Greenbrier, expanding our market position and earnings potential as we manage escalating costs and other operating strains,” The Greenbrier Companies President and CEO Lorie Tekorius said.

Greenbrier 2Q22: $3.6B Backlog, Lease Utilization 98%

Despite escalating costs and pandemic-related challenges in the second fiscal-quarter ending Feb. 28, 2022, The Greenbrier Companies achieved its “fifth consecutive quarter with a book-to-bill ratio exceeding 1.0x on orders approaching $1 billion,” President and CEO Lorie Tekorius reported on April 6. “Greenbrier ended the quarter with backlog at levels last seen six years ago.”

Cowen Insight: 1Q22 Shipper Surveys Say …

Cowen and Company transportation analysts Jason Seidl (Managing Director and Railway Age Wall Street Contributing Editor), Matt Elkott and Elliott Alper recently conducted their first-quarter 2022 rail equipment and shipper surveys. Following are the results, plus insights on The Greenbrier Companies Inc. (GBX), Trinity Industries Inc. (TRN), GATX Corporation, and the Class I railroads, ahead of earnings.

Matt Elkott

Cowen: Wabtec Investor Day Insight

March 9 was Investor Day for Wabtec (WAB), and its five-year margin target is ahead of consensus for the next three years (the maximum available). Revenue and EPS targets are not inconsistent with Street expectations. Cowen and Company believes WAB’s geographic breakout could position it well as some rail commodities shift from Russia to other world regions.