Unexpected rail car orders following a disappointing second
quarter gave FreightCar America Inc. a boost on Wall
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
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
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
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
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.