Investing

Institutional Investors Are Buying Railroad Equipment Stocks Hand Over Fist

Larry Ramer

Published: April 19, 2023 10:43 pm

Amid higher oil prices, strong demand for automobiles and coal, the beginning of an infrastructure boom, and the rise in railcar deliveries over the last four quarters, the fair market value of institutions’ holdings of Railroad Equipment stocks soared a very impressive 8,438%, or 84 times in the fourth quarter of last year, Fintel data shows.

Moreover, the number of institutions that own the shares of these companies climbed 4% in Q4 over the previous quarter, reaching 873 owners.

Multiple, Positive Catalysts for Railroads and Railroad Equipment Companies

Railroads transport a great deal of oil. Amid the post-pandemic travel boom, the demand for oil transported by railroads has been strong. Specifically, last month, the number of carloads of “petroleum & petroleum products” carried by U.S. railroads jumped 9.4% versus the same period a year earlier.

Meanwhile, with travel surging and the U.S. automobile market strengthening, the number of carloads of “motor vehicles & parts” carried by railroads jumped 7.9% year-over-year last month. And relatively strong demand for coal is also benefiting railroads as they hauled 12% more carloads of that fossil fuel than in the same period a year earlier.

On the infrastructure front, spending on the construction of factories in the U.S. is booming, reaching $140 million in February, up from $91.67 million during the same period a year earlier, the Federal Reserve reported.

Additionally, the Bipartisan Infrastructure Law is starting to spur increased spending by governments in the U.S. on infrastructure. Since railroads haul components used in construction, they are benefiting from the trend.

For example, during the week ending April 1, the number of carloads of metallic ores and metals transported by American railroads jumped about 10%, versus the same week a year earlier.

Institutions Have Been Buying Shares of Wabtec and Greenbrier

Two of the largest companies in the U.S. railroad equipment space are Westinghouse Air Brake Technologies (US:WAB), also known as Wabtec, and Greenbrier Companies Inc (US:GBX). Major institutions have been buying a significant number of the shares of both names in recent weeks, Fintel.io data shows.

For example, on April 14, John W. Bristol & Co. reported that it had bought nearly $75 million of Wabtec stock, while the National Bank of Canada disclosed a $10.8 million purchase of the company’s shares on April 12. And most impressively, TIGRX-TIAA CREF, a large retirement fund, reported on March 28 that it had bought $52.5 million of Wabtec’s shares.

For its part, Greenbrier has been popular with exchange-trade funds and mutual funds, Fintel data shows. For example, Vanguard disclosed on March 31 that its High Dividend Yield Index Fund ETF (US:VYM) had  bought $4.29 million of GBX stock, while the Invesco S&P Smallcap Value With Momentum ETF (US:XSVM) disclosed on March 31 that it had purchased $5.06 million of the stock. Victory Capital Management on March 10 reported that it had bought $42.35 million of GBX stock.

Strong Financial Results

In the fourth quarter of 2022, Wabtec’s sales climbed 11.2% year-over-year to $2.3 billion, while its cash flow from operations increased to $410 million from $314 million during the same period a year earlier.

As for Greenbrier, its revenue soared 64% year-over-year to $1.12 billion in Q4, while its earnings per share, excluding certain items, climbed to 99 cents from 5 cents in the comparable Q4 of 2021.

This article originally appeared on Fintel