FreightCar America, Inc. (NASDAQ:RAIL), like American Railcar Industries, Inc. (NASDAQ:ARII), is down around 30%. But unlike American Railcar, it doesn’t look cheap when compared to other companies in the railroad sector. Earnings per share are actually negative at $(0.18), and earnings have missed estimates in three of the last four quarters.
Union Pacific Corporation (NYSE:UNP) is one of the leaders in the railroad sector. With over 32,000 miles of rail, this company is a behemoth that is still growing and becoming more efficient. In 2012, the company grew revenue 7%, but net income grew 20%. Shareholders are also being rewarded nicely as the company grew earnings per share 13% in the most recent quarter.
Greenbrier Companies Inc (NYSE:GBX) is having a great year, up over 80% from 52-week lows. This freight-car manufacturer has all the business it can handle right now. The order backlog increased 20% in the most recent quarter from the previous quarter. A solid balance sheet — zero debt and a cash position of $64.5 million — makes this another solid play.
FreightCar America, Inc. (NASDAQ:RAIL) is down, but has some uncertainty. Union Pacific Corporation (NYSE:UNP) and Greenbrier Companies Inc (NYSE:GBX) are more certain, but trading near 52-week highs. When compared with its peers, American Railcar’s drop in stock price, coupled with its low forward P/E ratio, make it an exciting opportunity.
Interesting possibility
One aspect of this company that is hard to quantify is well-known investor Carl Icahn’s position in the company. He holds the controlling interest, and on more than one occasion, has attempted to buy-out competitor Greenbrier. All buy-out offers have been rejected by Greenbrier, though it has since offered to buy-out American Railcar instead. Interestingly enough, Icahn is also a major shareholder in Greenbrier.
A buy-out or merger would be good for both companies, as it would combine their energies and likely lead to better margins. At this time, this possibility is mostly speculation. But one thing I know for sure is that Icahn will continue his attempt to make this happen.
Conclusion
Thanks to Mr. Market, you can get into American Railcar Industries, Inc. (NASDAQ:ARII) at a substantial discount to where it sat just a couple months ago. There is some uncertainty in the sector, and some growth aspects are slowing. But given the current valuation and opportunities, I believe American Railcar is poised for a rebound in the near future.
The article This Company Is on the Right Track originally appeared on Fool.com and is written by Jon Quast.
Jon Quast has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Jon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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