Rail Manufacturer Crushes Earnings Estimates And Is A Buy On Any Pullback

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 |  About: FreightCar America, Inc. (RAIL)
by: Bret Jensen

FreightCar America (NASDAQ:RAIL) report blowout earnings before the bell this morning. The stock has fallen by a third over the past few months on legitimate concerns about the slowdown for demand from the coal industry. The company does anticipate next quarter's deliveries will be down from this quarter's production. Nonetheless, RAIL will probably jump at the open, but might be worth a play if the shares come down from its initial opening pop. The company seems to have real momentum along with compelling valuation.

Highlights from earnings report:

  • Revenue jumped threefold Y/Y to $219mm, almost $50mm over consensus estimates.
  • Railcar deliveries in the quarter also tripled to 2,613 units.
  • This led to earnings of 81 cents, easily beating consensus estimates calling for 38 cents a share.

4 additional reasons RAIL is a buy at anything under $23 a share:

  • This is the second consecutive quarter the company has crushed estimates. Consensus estimates for FY2012 had already moved up sharply for FY2012 over the last two months, I would look for these estimates to be revised up further.
  • Insiders have been net buyers of the stock over the last nine months.
  • The stock is selling for a forward PE of less than 9, a huge discount to its five year average (40.1). It also has a robust balance sheet with over $100mm in net cash on the books (around 40% of its market capitalization).
  • The median analysts' price target on RAIL is $29 a share (7 analysts cover the stock). I would look for price targets to be raised over the coming weeks

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in RAIL over the next 72 hours.