The Zacks Analyst Blog Highlights: Railcar Industries, Greenbrier, Trinity Industries and GATX
For Immediate Release
Chicago, IL – November 10, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Railcar Industries, Inc. (ARII-Free Report), Greenbrier Companies, Inc. (GBX-Free Report), Trinity Industries Inc. (TRN-Free Report) and GATX Corp. (GMT-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Thursday’s Analyst Blog:
Railcar Demand Defies Oil Slide: 4 Stock Picks
The demand for railroad tank-car orders continues to grow despite the decline in oil prices. Even as crude fell to its lowest level since 2011, railcar manufacturers are failing to meet demand. According to data from Bloomberg, order backlog for railcars touched the highest ever level in the last quarter. The period also witnessed bookings for 42,900 freight and tank cars.
Massive Shortages
Expectedly, manufacturers such as American Railcar Industries, Inc. (ARII-Free Report) and Union Tank Car, owned by Carl Icahn and Warren Buffett respectively, are struggling to keep up with demand. Meanwhile, The Greenbrier Companies, Inc. (GBX-Free Report) and Trinity Industries Inc. (TRN-Free Report) are undergoing expansion.
The jump in demand is a result of the increase in oil shipments and regulatory measures which may result in several thousand railcars going off the tracks. Analysts believe that the buildup in orders will result in excellent conditions for the sector in 2015, even if oil prices continue to trend lower.
Defying Current Stock Prices
Railways equipment stocks have taken losses this quarter. This is an outcome of concerns that the decline in crude prices will lead to a fall in tank-car orders. However, orders for railcars continue to flow in. Earlier this week, Trinity announced that it will deliver 8,950 cars to GATX Corp. (GMT-Free Report), which leases out railcars.
The railcars will be delivered over a period of four years starting 2016. The majority of these are tank cars. According to numbers compiled by Bloomberg from Railway Supply Institute data, this is very close to the total number of orders for the entire industry in 2009, which came in at 9,250.
Diversifying Demand
During a telephonic interview earlier this week, Icahn said: "We correctly predicted that lease rates on tank cars were going to go up explosively." He was referring to American Railcar’s failed bid for Greenbrier in 2012. Following the failure of the acquisition, American Railcar’s value has gone up twofold. Meanwhile, Greenbrier has shot up more than three times.
Meanwhile, demand for railcars has diversified to sectors beyond oil. This is a result of increasing shipments of chemicals, grain, autos and construction materials. As a result, many railroads have increased the number of railcars and locomotives to decrease track congestion.
Our Choices
Below we present four stocks which will gain from these trends, each of which also has a good Zacks Rank.
The Greenbrier Companies designs, manufactures and markets railroad freight car equipment in North America and Europe. It also manufactures marine barges in North America. Greenbrier undertakes railcar refurbishment, provides wheel services and parts as well as other services.
Greenbrier holds a Zacks Rank #1 (Strong Buy) and has expected earnings growth of 45.5%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 13.46.
GATX leases, operates and manages long-lasting, widely-used assets in rail, marine and industrial equipment markets. GATX also invests in joint ventures that complement existing business activities. The company is a leader in leasing transportation assets and controls one of the largest railcar fleets in the world.
Apart from a Zacks Rank #1 (Strong Buy), GATX has expected earnings growth of 26.6%. It has a P/E (F1) of 14.65.
Trinity Industries produces and sells a wide range of products across several product lines, including railcars and railcar parts. Trinity also leases railcars to its customers using its integrated business model. This includes its leasing business Trinity Industries Leasing Company (TILCF). TILC is a leading provider of comprehensive rail services in North America.
Currently the company holds a Zacks Rank #2 (Buy) and has expected earnings growth of 78.6%. It has a P/E (F1) of 8.18.
American Railcar Industries is a leading North American manufacturer of covered hopper and tank railcars. ARI also repairs and refurbishes railcars and provides fleet management services. It also designs and manufactures railcar and industrial components.
Apart from a Zacks Rank #2 (Buy), American Railcar has expected earnings growth of 11.6%. It has a P/E (F1) of 13.91.
A buoyant economy seems to be powering the demand for railcars. This is borne out by the fact that railcar demand is coming from sectors other than petroleum. Given the current economic scenario, adding these stocks to your portfolio would be a prudent choice.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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