KeyBanc Upgrades Railcar Stocks American Railcar Industries (ARII) and Greenbrier (GBX) to Buy

March 15, 2010 7:20 AM EDT
Get Alerts ARII Hot Sheet
Price: $47.19 --0%

Rating Summary:
    1 Buy, 8 Hold, 3 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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KeyBanc upgrades railcar stocks American Railcar Industries (NASDAQ: ARII) and Greenbrier (NYSE: GBX) to BUY, Reiterating BUY on Trinity Industries (NYSE: TRN), price target $24.

KeyBanc analyst says, "We are upgrading ARII and GBX to BUY from HOLD following our recent attendance at the annual Rail Equipment Finance Conference, and we reiterate our BUY rating for TRN. Following two days of presentations, accompanied by numerous conversations with public and private lessors, shippers and manufacturers, we believe that while the overall message was still dominated by talk of poor conditions and low visibility, we clearly got the sense that the attendees' level of bearish conviction is on the wane. To be clear, we are not changing our stance that there will be few orders for new rail cars this year. That said, we are seeing evidence of declining railroad velocity, firming lease rates, rising steel prices, and sequential increases in rail car loadings, which should lead to more railcars coming out of storage. In our view, these factors constitute leading indicators to future railcar orders, which suggests the backlog will begin to grow...As such, we believe investors that have more of an investing (vs. trading) orientation should accumulate shares of ARII, GBX and TRN. We maintain our HOLD rating on FreightCar America (Nasdaq: RAIL) due to its recent price appreciation and our concerns regarding domestic coal. We are maintaining our 2010 industry delivery estimate of 10,925, but we are increasing our FY11 estimate to 19,000 from 14,800."

"We are upgrading ARII to BUY, and introducing an $18 price target. We are reducing our FY10 EPS estimate to a loss of $.047 from a loss of $0.25, and we are increasing our FY11 estimate to $0.26 from $0.17. ARII is currently trading at 5.4x our FY10 EBITDA estimate and 2.4x our FY11 EBITDA estimate."

"We are upgrading GBX to BUY, and introducing a $22 price target. We are maintaining our FY10 estimate of a loss of $0.19, we are increasing our FY11 estimate to $0.37 from $0.18, and we are introducing an FY12 estimate of $0.73."

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