LOS ANGELES Unexpected rail car orders following a disappointing second quarter gave FreightCar America Inc. a boost on Wall Street.
FreightCar Americas common stock rose 9.3 percent to $19.79 per share on the Nasdaq Stock Market Aug. 5, and gained another 0.5 percent the next day to close at $19.89 apiece.
The move was apparently in reaction to orders for 5,500 cars that the company said it received after the second quarter ended. Of this, 4,000 are for rebuilt coal cars for the eastern market.
The Chicago-based rail car manufacturer, which builds mainly coal cars, is looking to diversify outside this declining market, primarily with a new plant in Alabama (amm.com, Aug. 5).
"Despite the continued drop in coal car loadings, the eastern coal car replacement cycle continues, as evidenced by the large rebuild orders" that the company received in the current quarter, president and chief operating officer Joseph E. McNeely said during a quarterly earnings call.
Edward J. Whalen, chief executive officer, said the company believes the rebuilt coal cars will supply "eastern Class 1 railroads with an aging fleet."
Theodore W. Baun, senior vice president of marketing and sales, also noted that industrywide seasonal factors are drawing out-of-service coal cars back into use.
"We estimate that the number of coal cars in storage decreased from about 28,000 at the end of March to approximately 20,000 at the end of June due to seasonal demand for coal cars," he said.
Baun pointed out that work on the coal cars being rebuilt by FreightCar will be "rather extensive," with revenue per car at two-thirds of a similar new car. Production will start later this year and run through 2014.
While second-quarter rail industry loadings of some commodities grew in the second quarter compared with the same period last year, coal loadings "continued to be challenged," decreasing 1 percent from the second quarter of 2012, he said.
None of the 1,500 new cars ordered from FreightCar after the second quarter were coal cars, Whalen said, but instead are non-coal hoppers, and non-coal gondolas and flat cars.
Baun pointed out that while the rail car industrys backlog increased to 73,706 units at the end of June, up from both the first quarter and the year-ago quarter, this was due mainly to "continued strength in the tank car market" rather than non-tank car demand.
Industry orders for non-tank cars, which include coal cars, remained weak by historical standards, but nevertheless more than doubled in the second quarter vs. the first quarter, he said.