Some ideas never fade. Instead, they take on a global cast of
mind. According to Wiki, Dow Theory emerged from 255 Wall Street
Journal editorials written by Charles H. Dow (1851-1902), the
journalist, founder and first editor of
The Wall Street Journal
and co-founder of Dow Jones and Company.
In Dow's late-19th century world, the U.S. was a growing industrial
power. The U.S. had population centers, but factories were
scattered throughout the country. Factories had to ship their
goods, usually by rail. Dow's first stock averages were an index of
industrial (manufacturing) companies and rail companies.
To Dow, a bull market in industrials could not occur unless the
railway average rallied as well, usually first. With China shipping
massive amounts of goods into the U.S. today, Dow transport theory
found new life and use. Add on the need to ship via rail the oil
from fracking operations in the Bakken Shale oil fields of North
America. It is back to the future. In other words, rail leads
According to Dow's logic, if manufacturers' profits are rising, it
follows they are producing more. If they produce more, they have to
ship more goods to consumers. Hence, if an investor is looking for
signs of health in manufacturers, an investor should look at
companies that ship the output to market -- the railroads.
The 15 companies representing the Transportation-Equipment and
Leasing sector in the Zacks Industry Rank entered the spotlight in
the last week, gaining +124 positions. This industry now enjoys a
rank of #22 out of 265 ranked industries. With 12 positive earnings
revisions compared with 15 negative, this industry, as a whole, is
turning a corner after a hard U.S. winter. Averaging each
company's positive recent Earnings Per Share (EPS) surprises comes
to +11%. Earning beats this large means the industry warrants a
closer look for outperforming shares.
Below are two companies that moved into the prime position of a
Zacks Rank #1 (Strong Buy) from a #2 (Buy) rating last week.
Concentrate your portfolio with Zacks #1 Rank shares. Upward
ranking movement in our system implies EPS surprises should
When positive EPS rail industry outlooks lead, Charles Dow is
proven right once again.
American Railcar Industries (
ARII was upgraded to a Zacks Rank #1 (Strong Buy) last week from #2
American Railcar Industries, Inc. is a leading North American
manufacturer of covered hopper and tank railcars. ARI also repairs
and refurbishes railcars, provides fleet management services and
designs and manufactures railcar and industrial components used in
the production of its railcars as well as railcars and non-railcar
industrial products produced by others.
ARII's last earnings beat was +33%. The past Q1-14 quarter has an
expected EPS estimate of $1.13 a share. It reports actuals on April
30th. The 2015 estimate moved ahead by a nickel in the last 30
GATX Corporation (
GMT is a Zacks Rank #1 (Strong Buy). It moved up from a Zacks Rank
#2 (Buy) over the last week. Having just reported, this company
reports its next quarterly earnings on July 17, 2014.
Based in Chicago, Illinois, GATX Corporation leases, operates and
manages long-lasting, widely used assets in rail, marine and
industrial equipment markets. GATX Corp. also invests in joint
ventures that complement existing business activities. The company
is a leader in leasing transportation assets and controls one of
the largest railcar fleets in the world.
GMT's recent Q1 surprise was +22%. The earnings beat before that
was +23%. Over the last 7 days, next year's consensus annual 2015
earnings estimate moved up from $4.50 a share to $4.82 a share.
AMER RAILCAR (ARII): Free Stock Analysis Report
GATX CORP (GMT): Free Stock Analysis Report
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