The percentage of shippers planning to order railcars ticked down for the second consecutive quarter, but on a same-shipper basis, the percentage increased modestly, and the conviction level about ordering strengthened, according to Cowen and Company’s Third-Quarter 2016 Rail Equipment Survey.
“Order sizes also rose, with gondolas showing the biggest improvement,” says Cowen and Company Vice President, Equity Research Matt Elkott. “We view the results as neutral to slightly positive and continue to favor Trinity and Greenbrier.”
“About 37% of shippers said they will or may order railcars in the next 12 months,” Elkott notes. “This is the second consecutive sequential decrease following the 42% and 48% recorded in our 2Q16 and 1Q16 surveys, respectively. While this is the latest indication that demand for rail equipment remains weak, a closer examination of the survey results suggests there may be a reason for cautious optimism. Indeed, within the group of participants who answered ‘yes’ or ‘maybe’ in 3Q16, 67% said ‘yes,’ compared to 36% in 2Q16, and 33% said ‘maybe,’ compared to 64% in 2Q16. This suggests that the level of certainty about ordering railcars among the shippers planning to place orders has increased. The results on a same-shipper basis are even a bit more encouraging.
“Roughly 46% of same shippers said they will or may order railcars in the next twelve months, compared to 42% in 2Q16. Within this 46%, the dynamic has shifted decidedly towards an increased level of certainty about placing orders, with 66% saying ‘yes’ and 34% saying ‘maybe,’, compared to 36% saying ‘yes’ and 64% saying ‘maybe’ in the second quarter survey.”
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Download attachments: Cowen and Company Third-Quarter 2016 Rail Equipment Survey