American Railcar Industries Inc.
) delivered positive earnings surprises in three out of the last
four quarters, outpacing the Zacks Consensus Estimate by an average
earnings surprise of 77.83%. This leading manufacturer of hopper
and tank railcars is expected to derive huge benefits from the
booming U.S. freight railroad industry going forward.
Growing demand for railcars, strong order backlogs, and improved
pricing helped American Railcar Industries become a Zacks #1 Rank
(Strong Buy) on May 3, 2012.
Strong First Quarter
On April 25, American Railcar Industries reported robust financial
results for the first quarter of 2012, including net earnings per
share of $0.56 that beat the Zacks Consensus Estimate by an
outstanding 107.41%. The result also reversed the year-ago
quarter's net loss of $0.25. Total revenue of $181.6 million
surpassed the Zacks Consensus Estimate by 9.35% while improving
more than 114% year over year.
American Railcar improved margins across the board in the first
quarter. Quarterly gross margin was 16.72%, an improvement of 10.9%
over the prior-year quarter. Operating margin was 13.11%, up 15.4%,
and net margin was 6.61%, up 12.9%. Adjusted EBITDA was $30.32
million, compared with just $3.74 million in the prior-year
Strong demand for railcars, an improved pricing environment, and
positive economies of scale are primarily attributable for this
exceptional performance. During the first quarter, the company
shipped 2,200 railcars and received orders for 1,860, resulting in
an order backlog of 6,190 railcars on March 31, 2012 compared with
6,530 on December 31, 2011. Importantly, in April 2012, it received
orders for an additional 2,300 railcars, reflecting the strong
growth potential of American Railcar.
Attractive Earnings Estimate Revisions
Estimates for American Railcar have been rising significantly over
the last 60 days. The Zacks Consensus Estimate for fiscal 2012
moved up 51.75% to $2.17, while it increased 26.9% to $2.50 for
2013. The current Zacks Consensus Estimate for fiscal 2012
indicates a gigantic growth of 987.5% year over year. Furthermore,
the current estimate for fiscal 2013 implies year-over-year growth
of another 14.79%.
Valuation Looks Compelling
Valuation of American Railcar looks reasonable. The current forward
P/E of 11.66x implies a premium of 22.1% over the peer group
average of 9.55x. However, with respect to the Price/Sales
multiple, the stock is currently trading at 0.88x, an attractive
discount of 54.55% from the peer group average of 1.36x.
Chart Shows Growth Potential
The price and consensus chart is showing robust earnings growth
potential as depicted by the widening gap between the estimate
lines of 2011, 2012 and 2013. This uptrend should encourage
investors as the stock is likely to continue with its growth riding
on a strong U.S. railroad industry. The 2012 and 2013 estimate
lines are well above the stock price, indicating that American
Railcar is currently undervalued.
Headquartered in St. Charles, Missouri, American Railcar Industries
Inc. was founded in 1988. The company is a leading North American
manufacturer of covered hopper and tank railcars. American Railcar
also leases railcars to third parties. Additionally, it offers
railcar repair services, engineering and field services and fleet
AMER RAILCAR (ARII): Free Stock Analysis Report
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