FreightCar America, Inc. reported on Nov. 2, 2015 third-quarter 2015 earnings per share of $0.96. This is compared to an estimate of $0.88 made by KeyBanc Capital Market Inc., and a Wall Street consensus estimate of $0.78.
Results exclude a pre-tax gain on the sale of FreightCar America’s railcar repair and maintenance services business for $4.6 million, or $0.24 per diluted share, after tax. Reported revenues of $241 million were 8% below KeyBanc’s estimate of $263 million and below consensus of $259 million. On a year-over-year basis, sales increased 26.7% from $190 million last year. FreightCar America attributed the revenue growth to increased deliveries.
Operating margins of 7.6% came in 170 basis pints above KeyBanc’s expectation of 5.9%, driven by a 250 basis point outperformance on the gross margin line of 12.0% (vs. KeyBanc’s estimate of 9.5%) and a 90 basis point underperformance in SG&A (selling, general and administrative expenses) at 4.4% (vs. KeyBanc’s estimate of 3.6%). “We think the operating margin beat relative to our model was driven by stronger manufacturing margins, which, in turn, were driven by a higher mix of new cars to rebuilds in total deliveries, as well as the benefit of operational efficiencies,” KeyBanc said.
In the quarter, FreightCar America delivered 2,846 railcars (2,076 new and 770 rebuilt) and took orders for 1,008 railcars, implying a book-to-bill of 0.4x, in line with the industry. The company ended the quarter with a backlog of 12,237 railcars. Non-coal cars comprised 94% of the total backlog vs. 66% a year ago.
Longer-term, management lowered the bottom end of its FY15 delivery range to 9,000-9,500 railcars, vs. its previous guidance of ~9,500 railcars. “The guidance implies a 4Q15 delivery range of 2,484-2,984 railcars,” KeyBanc said. “Additionally, FreightCar America provided FY16 deliveries between 7,000-8,000 railcars, as management does not see any meaningful coal car orders in the near term to replace the coal car rebuild program concluding this year.”