Freightcar America (NASDAQ:RAIL) reported a sharp decline in third-quarter revenue and profitability as railcar deliveries fell, but executives pointed to a growing aftermarket business and a stronger order backlog as sources of support heading into 2027.
Revenue fell to $76.5 million from $160.5 million a year earlier, while deliveries declined to 662 railcars from 1,304. Chief Executive Officer Nick Randall said results through the first nine months had fallen short of the company’s expectations, though third-quarter figures were consistent with the preliminary results released in October.
“The commercial progress I have described has not yet translated into the level of earnings we expect from this business,” Randall said. He said the company’s priorities include meeting its production schedule, maintaining cost discipline and growing its aftermarket contribution.
Lower Volumes Weigh on Margins
Gross profit declined to $6.7 million from $24.2 million, and gross margin narrowed to 8.8% from 15.1%. Chief Financial Officer Mike Riordan attributed the decline primarily to lower deliveries and reduced absorption of fixed costs, partially offset by a higher proportion of aftermarket revenue.
Freightcar America reported net income of $8,000, including a $4.7 million noncash gain from remeasuring its warrant liability. On an adjusted basis, the company posted a net loss of $9.5 million, or 28 cents per share, compared with adjusted net income of $7.8 million, or 24 cents per diluted share, a year earlier. Adjusted earnings before interest, taxes, depreciation and amortization fell to $0.1 million from $15.9 million.
Riordan said a workforce realignment completed in the second quarter was delivering savings in line with the company’s previously announced target of approximately $12 million annually. He said manufacturing gross margins of around 10% to 11% were sustainable over the long term as demand returns.
Aftermarket Growth and Acquisitions
Aftermarket revenue rose 65% year over year to $10.8 million, supported by organic growth in parts and components and contributions from acquisitions. The segment recorded a 44.5% gross margin and $4 million in segment income.
Following the quarter, Freightcar America acquired Trinity Equipment Company, its third aftermarket acquisition in less than a year. Randall described the Michigan-based business as a supplier of original-equipment and replacement railcar components and fastening products. Riordan said the company expects the deal to be immediately accretive.
Asked whether the company could complete three or four acquisitions annually, Randall said the pace was difficult to forecast but that management remained interested in opportunities. Riordan added that the company had no mandate for a specific number of deals.
Riordan also said the third-quarter aftermarket margin benefited from a mix weighted toward proprietary products, which generally carry higher margins than distribution products.
Backlog Provides Visibility Into 2027
The company ended September with a backlog of 2,660 railcars valued at approximately $284.5 million, compared with 2,750 units valued at about $220 million a year earlier, Chief Commercial Officer Matt Tonn said. The prior-year backlog included a tank car retrofit order that has since been removed.
Riordan cautioned that the increase in the backlog’s implied average selling price was largely driven by the removal or delivery of retrofit and conversion orders, which cost substantially less than new railcars.
Total orders, including conversions, reached approximately 4,200 units in the first nine months of 2026, up 44% from the comparable period a year earlier. Randall said he expects the company to finish 2026 with more of the following year’s production booked than it had when entering 2026, but he did not provide guidance for 2027.
Tonn said industry orders rose to approximately 6,800 units in the third quarter from about 3,100 a year earlier. He also pointed to stronger rail traffic and fewer cars in storage, while Randall cautioned that improving indicators had not yet produced broad-based growth in new railcar demand and that pricing remained competitive.
Full-Year Outlook Reaffirmed
Freightcar America reaffirmed its October guidance for 2026 deliveries of 3,100 to 3,300 railcars, revenue of $370 million to $410 million and adjusted EBITDA of $15 million to $19 million.
In response to an analyst’s question about the implied fourth-quarter improvement, Randall said the orders supporting guidance were secured. Execution, weather and rail delays were among the factors management would monitor, he said.
Operating cash flow was $25.4 million in the third quarter, and the company ended September with $86.8 million in cash and $100.4 million in total debt. Riordan cautioned that a meaningful portion of the quarter’s cash flow came from favorable working-capital timing that is expected to reverse in the fourth quarter.
About Freightcar America (NASDAQ:RAIL)
FreightCar America, Inc. designs and manufactures freight railcars for the North American rail transportation industry. Its product portfolio has included aluminum and steel railcars, such as open-top hopper cars, gondolas, flat cars and other specialized freight equipment used to transport coal, aggregates, metals, agricultural products and other bulk commodities. The company serves major railroads, railcar leasing companies and industrial shippers. Its railcars are designed for applications that require durable, high-capacity equipment, with product offerings tailored to commodity transportation and intermodal or specialized freight needs.
