American Railcar Industries - Aggressive Growth
19 October 2012 - 11:00AM
Zacks
American Railcar Industries Inc. (ARII) is expected to
derive huge benefits from the booming U.S. freight railroad
industry going forward. This leading manufacturer of covered hopper
and tank railcars will report third-quarter results next week, and
has delivered positive earnings surprises in four out of the last
five quarters. Growing demand for railcars, strong order backlogs
and improved pricing make this Zacks #2 Rank (Buy) stock a
lucrative investment opportunity for growth-seeking investors.
Overall a Strong Second Quarter
On July 25, American Railcar reported second quarter earnings
per share of 63 cents, surpassing the Zacks Consensus Estimate by
16.67% and the year-ago earnings by a whopping 2,000%. Total
revenue of a little over $154.2 million increased 37.80% year over
year, but lagged the Zacks Consensus Estimate by 14.36%.
American Railcar improved margins across the board in the second
quarter. Quarterly gross margin was 21.67%, an improvement of
82.87% over the prior-year quarter. Operating margin was 16.83%, up
nearly 130%, and net margin was 8.66%, up a massive 1,598%.
Adjusted EBITDA was over $34.44 million compared with a mere $10.88
million in the prior-year quarter.
This performance is being driven by strong demand for railcars,
an improved pricing environment, a favorable sales mix and positive
economies of scale. During the second quarter, the company shipped
2,200 railcars and received orders for 2,810, resulting in an order
backlog of 6,800 railcars as of June 30, 2012, compared with 6,190
as of March 31, 2012.
American Railcar is scheduled to report its third quarter
earnings on October 24, 2012. The Zacks Consensus Estimate is 71
cents.
Attractive Earnings Estimate Revisions
The Zacks Consensus Estimate for 2012 moved up 17.04% to $2.61
in the past 90 days. There has also been a nearly 2% improvement in
the past week. The Zacks Consensus Estimate for 2013 increased
20.62% to $3.10 in the past 3 months with an advance of 2.6% in 7
days.
The current Zacks Consensus Estimates indicate year-over-year
gains of 1,202.50% for fiscal 2012 and 18.91% for fiscal 2013.
Valuation Looks Compelling
The valuation for American Railcar looks reasonable. The current
forward P/E of 11.85x implies a premium of 25.53% over the peer
group average of 9.44x. However, with respect to the Price/Sales
multiple, the stock is currently trading at 1.00x, an attractive
discount of 30.56% from the peer group average of 1.44x.
Solid Chart
The stock price has surged almost 21% since the announcement of
the second-quarter 2012 results. The Consensus Estimate line
indicates a steep upward movement through fiscal 2014. The chart
clearly shows that the stock price is expected to move higher than
the increasing estimate trend.
![](http://www.zacks.com/images/upload_dir/1350583999.jpg)
American Railcar Industries Inc. was founded in 1988, and is a
leading North American manufacturer of covered hopper and tank
railcars. American Railcar also leases railcars to third parties.
Additionally, it offers railcar repair services, engineering and
field services and fleet management services. Its current market
capital is approximately $10.91 billion.
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