The cash buyer is a subsidiary of Japan's Sumitomo Mitsui Banking Corporation. The price is based on an enterprise value of $2.778B and a fleet of about 29K railcars.
There is an option for Icahn to sell and SMBC to buy about another 4.8K additional railcars over the next three years. If this option is exercised in full, it would bring the total sale price to $3.364B.
General Electric (NYSE:GE) was yesterday's biggest laggard among Dow stocks, sinking 1.6% after reporting a 2% drop in orders for Q2, with industrial orders - GE’s jet engines, power turbines, oil production equipment, et. al. - plunging 16% amid weakness in oil and gas prices that hurt demand.
"The texture of this quarter is very similar to the two most recent quarters, with exceptionally weak orders,” says Morgan Stanley's Nigel Coe, who rates GE at Equal Weight with a $32 price target.
GE's total Q2 revenues rose 15% Y/Y to $33.5B, but organic industrial sales excluding the Alstom acquisition fell 1%; GE needs to meet its own expectations for a substantial upturn in organic trends in H2 in an "extremely challenging" environment, Coe says.
"Those are capital intensive purchases and if those get pushed out even just a little bit" it could weaken GE's performance, says Edward Jones analyst Jeff Windau.
Andrew Elofson at Davidson Investment Advisors takes the long view, seeing Q2 as "a speed bump on the path to their transformation” and not really looking at whether GE can hit its 5% organic sales growth target for H2.
But Standpoint Research’s Ronnie Moas responded to the Q2 results by slapping a Sell rating on GE with a $26 price target, seeing no reason to own the shares that trade at more than 20x 2016 EPS estimates while "dozens" of mid-cap names with room to grow trade at or below 10x earnings - such as YRCW, TGI, AVH, GBX, ARII, CBI, UAL, SPR and ACM.
Total U.S. carload traffic for the first 22 weeks of 2016 is down 8% to 10,923,300 carloads, according to data from the Association of American Railroads. Weak demand for transport of coal and petroleum products continues to be major factor.
Intermodal containers and trailers traffic fell 2% to 5,648,851 units.
U.S. rail traffic volume decreased 14% to 5,274,449 carloads.
Railroad traffic is also lower in Canada (-8%) and Mexico (-0.1%) on a YTD comparison.
American Railcar Industries (ARII +1.4%) is downgraded to Underweight from Hold at BB&T, which says the rail-car cycle has begun a multi-year cycle of declining annual deliveries.
While ARII's earnings will remain elevated during 2016, the firm expects more meaningful EPS declines thereafter.
Pricing of new cars and lease renewal rates have become extremely competitive during the last 90 days, which BB&T believes eventually will leave ARII's comparatively small backlog of 7.1K units vulnerable to weak conditions as it seeks to fill open slots.