Heeding the Rail Crossing Alarms
After being bullish for more than a year on the rail car manufacturers, at the end of November, I shifted gears and became bearish on Trinity Industries (TRN), Freightcar America (RAIL), American Railcar (ARII) and The Greenbrier Companies (GBX). At the time, industry backlog levels for new railcars were improving, but there were signs that all was not well in the rail land.
During November, rail traffic data reported by the American Association of Railroads (AAR) began to weaken -- it was down 4% on a year-over-year basis in November. While intermodal demand improved in December, overall rail carloads were down 3% year over year in December and that contraction continued in January, when carloads fell 6.3%, year-over-year. To you, me and other investors, falling carloads means that rail capacity is loosening at Burlington Northern (BNI), Norfolk Southern (NSC) and Union Pacific (UNP). That does not bode well for new rail car orders and it could mean that industry pricing may soften, a not so good thing for margins. ...407 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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