Rail Car Maker Doubles EPS Estimate (RAIL, ARII, GBX, CSX, UNP, CP)

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The past year has not been particularly kind to rail car makers. That may be changing, with FreightCar America Inc.’s (NASDAQ: RAIL) first quarter earnings report out this morning. Despite lower rail traffic due to a drop in coal shipments, FreightCar posted diluted EPS of $0.81 for the first quarter, more than double the consensus estimate of $0.39. Revenue also crushed expectations, coming in at $219.1 million versus an estimate of $170.6 million. But there are some headwinds.

American Railcar Industries Inc. (NASDAQ: ARII) also more than doubled EPS estimates for the quarter and Greenbriar Companies (NYSE: GBX) beat estimates by more than 25%. Railroads fared well too, though not with the same big move. CSX Corp. (NYSE: CSX) beat its EPS estimate by 13%, Union Pacific Corp. (NYSE: UNP) beat by about 10%, and Canadian Pacific Railway Ltd. (NYSE: CP) beat the consensus estimate by 5%.

FreightCar delivered about 3 times as many cars in the first quarter as it did in the same period a year ago. The not-so-good news is that orders fell significantly in the quarter, from 4,027 a year ago to 1,244 this year. Backlog is growing, though, from 5,206 a year ago to 6,934 this year.

Sequentially FreightCar’s backlog has dipped from 8,303 in December 2011 to 6,934 at the end of March. Orders need to pick up or the backlog will peter out in the not-so-distant future.

Rail traffic in April was down -5.5% year-over-year, and coal shipments were down -16.6%, the largest decrease on record according to the American Association of Railroads. The number of rail cars in storage now totals about 20% of the fleet, and the number has increased for five straight months.

FreightCar did not offer any guidance in today’s earnings report, but analysts are expecting EPS of $0.43 next quarter and full-year EPS of $1.88. Given today’s strong report those look like slam dunks. But there are a couple of reasons to be cautious here.

FreightCar’s shares are up about 3.7% in the first 45 minutes of trading, but the shares had traded up as much as 18% in the pre-market. The 52-week range is 12.82-$24.01.

Paul Ausick

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