Rail Transport Equipment: Let Growth Light the Way - Zacks Industry Rank Analysis

How can a low-risk investor play strong growth in U.S. auto, agricultural and energy markets? How about U.S. railroads and their suppliers? These old-school businesses generate robust earnings momentum from each growth piston.  

Shares from the 15 companies that incorporate the Transportation-Equipment and Leasing industry in our Zacks Industry Ranks should stay firmly in your portfolio. The industry gained +4 positions in our ranking system in the last week alone; it's nestled into a top #24 position out of 265 industries.  

This week, upward motion arrived via 2 fresh positive earnings revisions. Earnings Per Share EPS surprises across the industry have averaged +9% in past quarters. Earning beats this consistent -- sustained over many consecutive quarters -- show share momentum stories have staying power.

One successful company making new railcars in this ongoing rail expansion is Greenbrier Industries GBX. Its refreshed rail-car product portfolio includes new products such as its Multi-Max™ intermodal auto unit; large cube covered hopper cars for commodity transport such as plastic pellets; pressurized tank cars; and a next-generation tank car to transport oil. During the past year, Greenbrier received orders for 39,000 rail cars in North America and Europe valued at $3.7 billion.

For the U.S. railroads themselves, think through NAFTA trade growth stories.

Investment by foreign automakers and other companies is boosting rail freight volumes, helping to increase U.S.-Mexico trade by +5.3% in 2014. That easily outstrips the pace of expansion in both countries.

Union Pacific Corp UNP and Kansas City Southern KSU have reaped most of the gains, as the value of U.S.-Mexico rail trade soared +50% since 2008.

Here's the latest news off the railroad presses: Warren Buffett's private rail company BNSF is trying to grab more business with a new route in partnership with Mexico's Ferromex. It will connect Mexico's car-assembly heartland with Chicago.

Finally, consider two less well-known companies that moved into the prime positions of a Zacks Rank #1 (Strong Buy) and #2 (Buy) ratings, respectively. Concentrate your portfolio with Zacks #1 or #2 Rank shares. Upward ranking motion in our system implies EPS surprises should continue.

When EPS rail supplier outlooks light the way, bulls on the U.S economy are validated.

(Play A) Trinity Industries, Inc. TRN is currently a Zacks Rank #1.

$48 dollars a share buys you $4.08 in 2015 earnings. The Prices to Sales ratio is a still low 1.5, while the forward P/E is 12.7. The last 10 EPS surprises have all been positive.

This company is engaged in the manufacture, marketing and leasing of a wide variety of products consisting of the following business segments or groups: Railcar Group, Inland Barge Group, Parts and Services Group, Highway Construction Product Group, Concrete & Aggregate Group, Industrial Group & Others, which includes the company's captive insurance company and other peripheral businesses.

Trinity Industries reports its next quarterly earnings on October 29th.

(Play B) Wabtech WAB is currently a Zacks Rank #2.

$83 dollars a share buys you $4.03 in 2015 earnings. The neutral rating reflects that this share story has already been bought. Wait for the inevitable profit taking here before initiating a position.

The Price to Sales ratio is 2.9 and the Forward P/E is 25.3. However, the revenue growth rate is twice what Trinity is projecting. The last 10 EPS surprises have all been positive.

This company is one of North America's largest providers of value-added, technology-based products and services for the rail industry. Through its subsidiaries, the company manufactures a full range of products for locomotives, freight cars, and passenger transit vehicles. The company also builds new locomotives up to 4,000 horse power and provides aftermarket services, including locomotive and freight car fleet maintenance.

Wabtech reports its next quarterly earnings on October 23rd.

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WABTECH WAB: Free Stock Analysis Report
 
UNION PAC CORP UNP: Free Stock Analysis Report
 
TRINITY INDS IN TRN: Free Stock Analysis Report
 
GREENBRIER COS GBX: Free Stock Analysis Report
 
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