“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.”
After 44 years at the company, Trinity Industries, Inc. President and CEO Timothy R. Wallace has announced his retirement. Wallace has agreed to continue in his current roles “for as long as necessary to facilitate a smooth transition,” the company said. “The Trinity Board is initiating a search to identify Mr. Wallace’s successor and will consider both internal and external candidates.”
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.
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.
Financial Edge, September 2018: According to the good people at Railinc (a perennial speaker at the annual Rail Equipment Finance Conference, www.railequipmentfinance.com), as of July 1, 2018, 12,581 tank railcars had been retrofit to the DOT117R standard. In the first seven months of 2018, 5,349 tank railcars were retrofit (an average of 764 per month). If retrofits continue at the same pace for the remainder of the year, the total number of retrofit cars completed in 2018 would be more than double the total number of retrofits completed by the end of 2017.
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.”
Cowen and Company Equity Research Analyst Matt Elkott, who covers the railway supply sector, on May 4 issued a report that looks favorably upon two potential combinations: Trinity and GATX, and Wabtec and GE Transportation.
Reporting on Cowen and Co.’s just-concluded 10th Annual Global Transportation Conference, analyst Matt Elkott said that railcar demand recovery is “likely sustainable but not at the same level as second-quarter 2017.” Cowen is projecting third-quarter 2017 orders for 9,400 units, below the second quarter’s 12,000 but significantly higher than the first quarter’s 4,800 and similarly low prior levels.