After impressive gains yesterday, the stock market largely took Wednesday off, with major market benchmarks making only modest advances into all-time record high territory. Despite impressive figures on the jobs front from the ADP private-sector employment report, investors appeared reluctant to rely on the reading as a signal of better economic prospects ahead without confirmation from tomorrow's release from the Bureau of Labor Statistics.
Greenbrier soared 12% as the maker of railcars reported a strong fiscal third quarter and gave solid guidance for the near future. The company managed to reverse a year-ago loss with a profit of $1.03 per share, well in excess of what investors had expected to see, with a 37% jump in revenue coming on the heels of deliveries of 4,300 new railcars during the quarter. Greenbrier also boosted its range for full-year adjusted earnings per share by 14% to 21%. With high demand for tank cars coming from the energy industry's need to ship crude oil by rail in areas underserved by pipeline networks, Greenbrier could easily see continued demand skyrocket, especially as new regulations to increase rail safety encourage railroad companies to update and replace older railcars.
Walter Energy gained 7%. Despite ongoing concerns about the state of the metallurgical coal industry, Walter Energy has quietly climbed by more than 35% over the past month as bargain-hunters speculate that the coal producer could overcome the immense challenges it has in front of it right now. Prices for met-coal are so low, in fact, that many believe that they're below the marginal cost of production for U.S. miners like Walter Energy, and the company has a substantial debt load that makes it important for coal prices to rise in order to help it maintain its debt more effectively. With a tough decision to idle its higher-cost facilities, Walter Energy needs improving industry conditions quickly in order to return to a sustainable course.
Cliffs Natural Resources rose 5% as the company negotiated with activist investor Casablanca Capital for representation on the iron-ore producer's board of directors. Cliffs offered Casablanca three seats on a newly reconstituted nine-member board, and it said that regardless of Casablanca's response, it would name a new board chairman at the next annual shareholders' meeting. Casablanca rejected the proposal, with the 5% shareholder arguing that more extensive moves are necessary to remedy what it sees as Cliffs "wasting $9 billion on a disastrous diversification strategy and overseeing the destruction of 85% of shareholder value." From today's rise, investors clearly believe that whoever's in control of the company, Cliffs will take more dramatic action to improve its lot in the near future.
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