Summary
Freightcar America is a fine company with an old pedigree and a reputation for producing some of the best coal cars in America. Although the company has no debt, it also has few prospects for growth, since it seems that almost everyone, want to decrease coal usage in the future. While it has designs for other car types, it has never produced any of these in sufficient quantities to offset any substantial decline that it may be facing in its coal car business.
Analysis
Sham Gad of Investopedia incorrectly compares Freightcar America with American Railcar Industries by saying that they are an older company and have a deeper product line. Just the opposite is true. American Railcar Industries is a descendant of American Car & Foundry (ACF) which can trace its lineage back to 1899, while Freightcar America’s forerunner, Bethlehem Steel, purchased a railcar manufacture in 1923 that had been founded in 1901. As to its deep product lines, Freightcar America is almost entirely dependent on two car designs for the coal industry, while American Railcar Industries produces a number of different car types used in the chemical, food, durable goods, and construction industries.
Both companies had IPOs in recent years, and Freightcar America’s debt free balance sheet and large cash reserves accumulated during the boom in railcar construction has put them in an enviable position among all railcar builders, including American Railcar Industries. Moreover, the latter company’s large backlog of orders from CIT has put them at a temporary disadvantage compared to Freightcar America’s comparatively diverse source of orders for coal equipment. Nevertheless, when the recovery begins, American Railcar might grow faster due to its product lines than Freightcar America, if the bad news for coal production persists in the future.
Toby Kolstad consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
