Freightcar America (NASDAQ:RAIL) is positioning itself to expand its presence in railcar manufacturing and aftermarket components as management sees railcar demand recovering from a cyclical trough, CEO Nick Randall told investors during a company presentation.
Randall said the company, which has operated for 125 years and began as a coal-car manufacturer within U.S. Steel, now focuses exclusively on manufacturing rather than railcar leasing. FreightCar America shifted railcar production from the United States to Mexico in 2018 and began manufacturing at its Castaños facility in 2019. More recently, it has expanded into the aftermarket business through acquisitions, including Carly Railcar Components and Southern Parts & Equipment.
Market Share Gains During Industry Slowdown
Despite the softer market, FreightCar America has gained share. Randall said the company accounted for 47% of all railcar orders placed during the second quarter, based on FTR Transportation Intelligence data. Excluding tank cars, a category FreightCar America does not currently manufacture, the figure would have been 55%.
He cautioned that quarterly order intake can be uneven and said the company does not expect to sustain a 47% share. FreightCar America represented about 30% of orders during the first half of the year, compared with roughly 14% for the prior full year and approximately 4% to 5% about five years ago, according to Randall.
“We probably won’t sustain 47%, and we wouldn’t have the capacity, nor we want to sustain 47%,” Randall said. He said a more sustainable target could be around 18% market share in a 40,000-unit annual market, based on the company’s potential capacity of roughly 7,000 railcars.
Product Strategy and Manufacturing Flexibility
The company’s current portfolio covers about 70% of the railcar market, Randall said. FreightCar America identified open-top hoppers as its leading market position, while it estimates it has roughly one-third of the gondola market. The company has also been expanding in covered hoppers and flatcars.
Randall said the company competes by tailoring railcars to customer requirements rather than seeking to be the lowest-cost supplier. Its customers include railcar leasing companies, Class 1 railroads and private shippers or industrial operators. For example, the company can use different materials and alloys to improve corrosion resistance for railcars transporting certain commodities.
The company’s Castaños campus has four operating manufacturing lines, each generally capable of producing about 1,500 railcars annually, for total operating capacity of about 6,000 units. A fifth line is under roof and could be activated in less than 90 days if customer demand supports it, Randall said. Management believes it could produce 7,000 to 8,000 units annually without significant investment.
FreightCar America has also improved its ability to manufacture multiple product types on the same line during the same shift. Randall said shared engineering, parts and bill-of-materials processes between products such as covered hoppers and open-top hoppers allow the company to reduce supply-chain complexity and react more quickly to changing demand.
Some lead times can be as short as six weeks from order placement to shipment, compared with what Randall said can be a six- to nine-month industry timeline. The company also uses vertically integrated fabrication at its plant, processing raw materials into railcar components on site.
Aftermarket Expansion and Financial Outlook
Management described the aftermarket operation as a less cyclical complement to new railcar manufacturing. The business supplies parts and components and supports railcar maintenance, rebuilds and rebodying work. Randall said maintenance demand is supported by regulatory requirements and recurring replacement needs for items such as brake shoes and wear components.
FreightCar America has historically supplied parts associated with its coal-car fleet, but it has broadened the business through recent acquisitions. Randall said the company intends to continue pursuing bolt-on acquisitions, though it plans to emphasize transactions that can be funded with internally generated cash or are quickly accretive.
For the end of 2025, Randall cited $64.3 million in cash and total debt of $107 million. He said annual capital expenditures are expected to be about 1% of revenue, or roughly $3 million to $4 million. CFO Mike Riordan said inventory days were approximately 60 days.
Management’s full-year guidance midpoint calls for approximately 3,700 railcars shipped, revenue of about $430 million to $440 million and adjusted EBITDA of roughly $40 million. Randall said productivity actions taken in the second quarter are expected to produce annualized savings of about $12 million.
The company expects to enter the tank-car market later, with designs approved for general-purpose tank cars. Randall said FreightCar America expects a potential launch window in 2028 or 2029, after configuring products and obtaining plant certification.
About Freightcar America (NASDAQ:RAIL)
FreightCar America, Inc is a designer and manufacturer of specialized railroad freight cars, offering a diverse range of products that include tank cars, open and covered hoppers, gondolas, boxcars and centerbeam lumber cars. The company supports both new car construction and the rebuilding of existing fleets, providing custom engineering solutions to meet customer specifications and industry regulations. FreightCar America also supplies aftermarket parts, maintenance services and component remanufacturing for its own fleet and for third-party car owners.
Headquartered in Chicago, Illinois, FreightCar America traces its origins to early 20th-century railcar builders and began trading as an independent, publicly-listed company on the NASDAQ under the ticker RAIL following a spin-off in 2010.
