At Cowen and Company, we are revising our transportation OEM and machinery earnings estimates for fourth-quarter 2020 and 2021, and introducing our 2022 estimates; updating our North American Class 8 production forecast; and fine-tuning our railcar supply demand model. What are we seeing? Gradually improving supply-side dynamics.
Five major rail industry companies—Trinity Industries, Norfolk Southern, GATX, Genesee & Wyoming and Watco Cos.—have entered into a joint venture called RailPulse that is “expected to accelerate rail modal transformation through the advancement of GPS technology and other telematics across the North American railcar fleet.”
Norfolk Southern, Genesee & Wyoming, Watco Companies, GATX Corp. and TrinityRail are developing a telematics platform for railcars to provide real-time car location and condition/health monitoring data. Called “Rail Pulse,” it will help shippers, car owners/lessors and railroads better manage consists, incidents and maintenance. Rollout is expected by year-end 2022.
Chicago-based GATX Corp. reported third-quarter 2020 net income of $48.2 million, or $1.36 per diluted share, compared to net income of $37.2 million, or $1.03 per diluted share, in third-quarter 2019.
“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.”
GATX Corp. reported first-quarter 2020 net income of $46.3 million, or $1.31 per diluted share, compared to net income of $41.5 million, or $1.12 per diluted share, in the first quarter of 2019.
Cowen and Company recently released its Railcar Industry Forecast, which predicts 21% and 9% declines in deliveries and orders, respectively, this year.
Unless rail customers own their own railcars, they either use ones owned by the railroad or they lease them. One of the largest freight car and locomotive lessors is GATX Corp., which serves customers in several areas of the world. When a customer leases freight cars, the lessor expects them to be returned in good condition.
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:
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.