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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (58753)2/24/2017 2:00:40 PM
From: E_K_S  Read Replies (1) of 78748
 
American Railcar Industries, Inc. (ARII) - out w/ earnings and business prospects

The stock is over 8% higher after a decent earnings report giving how bad the railcar sector has performed during 2016. This was somewhat expected w/ TRN's earnings report last week but since ARII is a 'pure' railcar manufacturer and lessor of cars but I was quite impressed how management avoided the bleeding.

Q4 saw a significant slowdown in new rail car builds but more of the finished cars went into their leasing division. Backlog is still good but now growing like early last year.

Stock is selling at/near it's GN valuation of $49.00/share. I have GTC order to close the position at/near $54.00/share but may re-evaluate that depending on economy and/or new Trump tax proposal(s) both which s/d increase margins and profitability.

My original buy was 11/2016 is + 26% but s/d revert to it's 3 year mean price in next 24 months if economy begins to grow at/above 3%.

My take away is that management did an excellent job in a very difficult time. If/when demand picks up, their leasing division s/d generate more cash flow and/or those new build could be sold. In either case, these rail cars that were put into their leasing division, increases their BV, so they are set up to significantly benefit by higher cash flow (from leasing) and/or higher rail car sales (selling some of these new rail cars from the leasing division).

EKS
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