FreightCar America (RAIL:nasdaq)
I have to admit that I was starting to question my analysis on RAIL, as it seemed to drop every
day relentlessly for days on end, or so it seemed. It gets hard to watch something I thought was super cheap just get significantly cheaper.
So I read over RAIL’s earnings announcement with some sense of redemption. RAIL smoked
Wall Street’s earnings estimates. RAIL came in at 73 cents for the quarter, compared with the
consensus guess of 53 cents. That’s a huge beat.
RAIL as a business faces a lot of short-term uncertainty. But the long term looks good. The
railroads should see good growth over the years due to the rising demand for consumer goods,
coal and other commodities such as ethanol. Then you have the inevitable replacement cycle,
which looks like it’s going to be a real strong one, given the increasing age of the majority of
North America’s rail car fleet.
It’s one thing to bet on an industry that is down in the dumps. It’s another thing to find a
company that can withstand the adversity without having its existence threatened. RAIL has a
debt-free balance sheet and loads of cash. It is, as the most recent earnings report shows yet
again, a highly profitable business. It also has the lion’s share of its biggest market. RAIL has
80% of the market for coal-carrying rail cars. So I feel pretty good that RAIL is going to be
around.
Buy RAIL as an investment for the long term.