FreightCar America sees benefits in limited railcar supplies and improved rail service

While macroeconomic uncertainty and high inflation may keep some potential customers at bay, rail car maker FreightCar America is optimistic about the second half of 2022.

“I would like to emphasize how optimistic we are about the future,” President and CEO Jim Meyer said in prepared remarks during FreightCar America’s second-quarter earnings call Tuesday morning. “At the same time, I would like to emphasize that we are also realistic about the possible temporary effects of the economic slowdown and prolonged disruptions in the supply chain.”

“In the second half of this year, we will produce approximately twice as many wagons as in the first half of the year. And we will continue to build Castaños [Mexico] the facility is exactly as envisioned,” Meyer added. Company moved the last of its US manufacturing operations from Alabama to northern Mexico in 2020. “We will also remain committed to profitably scaling the business and not allowing our capacity and ongoing costs to become burdensome.”

Company executives described customer sentiment as “cautiously optimistic” and the recent rise in interest rates has halted some speculative buying. But FreightCar America still sees the railcar market as good for the company, as congestion on the rail network and the elimination of older railcar assets has left “a lot of car types in short supply,” Meyer said.

FreightCar America reported second-quarter 2022 net income of $56.8 million, or 58 cents per share, compared with a net loss of $4.2 million, or 24 cents per share, in the second quarter of 2021. year.

Second-quarter revenue rose 52% year-over-year to $56.8 million on the back of 468 railcar deliveries, in line with the company’s estimates and different from the 313 railcars delivered in the second quarter of 2021.

The company received 1,045 new orders in the second quarter and rejected a “comparable number” of orders, according to Meyer. In 2022, 3,000 to 3,200 railcars are expected to be delivered, compared to previous forecasts of 2,800 to 3,000.

“Our cost structure and the size of our presence in Mexico gives us some flexibility to focus on the business that is a good fit for Freightcar America,” said Chief Commercial Officer Matt Todd.

The company’s order book is currently full through the end of fiscal 2022, and according to Todd, FreightCar America is building its inventory for 2023 and beyond. The company also sold out its capacity in 2021.

“During the quarter, our level of inquiries remained strong and consistent with the activity we experienced last quarter, when industry demand was largely driven by rail car replacements,” Todd said during the earnings call. Inquiries from shippers increased, as did inquiries from more traditional leasing customers and Class I rail customers, he said.

Meanwhile, FreightCar America’s expansion projects continue to progress, Meyer said, with large-scale wheel and axle shops and a 162,000-square-foot fabrication shop coming soon. A new assembly plant with additional production lines will also be ready within six months, he said. The third production line will be ready in the fourth quarter, and the fourth production line will be ready in 2023. These additional lines will double production capacity to approximately 4,000-6,000 units per year.

“The second quarter of 2022 provides further evidence of the strength and efficiency of our production track in Castañas, which delivered more than 2,000 railcars in the second half of the year, while we continue to build the new track with a focus on meeting our future expected levels of demand and achieving world-class manufacturing excellence,” said Meyer.

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