Cowen and Company

Cowen Global Transport Conference Takeaways, Day 1

Reporting on the Cowen and Company Global Transport Conference in Bosto, Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl and analysts Matt Elkott and Adam Kramer offer these observations taken from the conference’s railcar/locomotive builder and Class I railroad panels, with a large trucker and a logistics/LTL company added for deeper perspective:

Rail Equipment Positioning Amid a Market Selloff: Cowen

A looming U.S. economic recession—just look at freight rail traffic figures from the past six months—and “cyclical industrial fears” have significantly impacted rail equipment equities, creating opportunities for long-term investors with what Cowen and Company analysts Matt Elkott, Jason Seidl (Railway Age Wall Street Contributing Editor) and Adam Kramer describe as “quality companies with self-forged narratives” like Wabtec, Trinity and Greenbrier.

Cowen: Shipper surveys say …

Two 2Q19 surveys of rail shippers on pricing/service quality and equipment needs conducted by Cowen and Company analysts Jason Seidl (Managing Director and Railway Age Wall Street Contributing Editor), Matt Elkott and Adam Kramer indicate that, compared to 1Q19, Class I railroad customers are anticipating somewhat lower rate increases, and little change in demand for new railcars.

Rail shippers “undoubtedly more negative”: Cowen

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.

Railcar market recovery remains intact: Cowen

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.”

Cowen: Railcars “robust,” locos “rebounding”

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.”

G&W “heading in the right direction”: Cowen analysis

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.”

2Q18 records for Norfolk Southern

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.