) has been running off the rails lately in posting negative
earnings surprises in two of the last three quarters. The stock
is a Zacks Rank #5 (Strong Sell) and is the Bear of the Day.
The most recent earnings report saw the company post a huge
decline in deliveries to 1,308 from 2,489 in the year ago period.
The number was also a sequential decline from the 1,618 railcars
delivered in 3Q12.
Orders were 473 units in the quarter, down 89% from the 4,481
units ordered in the year ago period.
Backlog was 2,881 at the end of the year, down 63% from teh
8,303 units at the end of 2011. The number was also a decrease
from the prior quarters level of 3,716.
FreightCar America builds and repairs railcars for the
railroad industry. The company was founded in 1901 and is
headquartered in Chicago, Illinois.
RAIL Negative Earnings Surprises
Over the last three quarters, RAIL has posted a negative
earnings surprise in two quarters. The first miss was the June
2012 quarter, with an $0.11 miss or a 19% negative surprise. The
company also missed on the top line as well.
The other miss was in the most recent quarter. The company
posted a loss of $0.08 per share when the Zacks Consensus
Estimate was looking for a gain of $0.26. The miss of $0.34
translates into a -130% negative surprise.
Following each miss the company saw its stock move lower. The
session following the first report saw the stock retrace by 4.4%.
After the second miss the stock declined a little over 7%.
Investors might do well to look to a few competitors of RAIL. As
a Zacks Rank #1 (Strong Buy) American Railcar (ARII) might be a
safer place to be invested. Another such play that is a little
more diversified would be
) and is a Zacks Rank #2 (Buy).
RAIL Sees Estimates Moving Lower
Estimates for RAIL have been declining of late. The Zacks
Consensus Estimate for 2013 for RAIL stood at $1.56 as of October
2012. The consensus now stands at $0.67. Similarly, estimates for
2014 have moved from $2.00 in September 2012 to their current
level of $1.15.
When we see stocks miss earnings, the valuation multiples are
likely to contract. The company is showing a 13x trailing
multiple of earnings, which is below the 18x industry average.
The forward multiple of 30x is quite rich when compared to the
16x industry average, but is likely higher due to lower future
outlook for earnings.
The 3 month chart below shows the stock doing the Wall Street
equivalent of "being discounted." The big drop in share price in
February was due to the most recent earnings report. Investors
can see that even at the lows reached at the day of the miss were
still higher than most recent prices by about $1 per share.
Brian Bolan is a Stock Strategist for Zacks.com. He is the
Editor in charge of the
Home Run Investor service
, a Buy and Hold service where he recommends the stocks in the
Brian is also the editor of
a trading service that focuses on small cap stocks and also
carries a risk limiting strategy.
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FREIGHTCAR AMER (RAIL): Free Stock Analysis
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