Out of the Gate: FreightCar America rises on upgrade

Shares of railroad car maker FreightCar America Inc. jumped Friday after a Jefferies & Co. analyst upgraded the stock and said the company's business will recover after reaching a low point in the first quarter.

The Chicago-based company reported its first-quarter results May 1. Its profit shrank 95 percent, to $1.1 million, or 10 cents per share, and revenue dropped 71 percent, to $95.1 million. A year ago, FreightCar earned $23 million, or $1.80 per share, on $322.5 million in revenue.

FreightCar's revenue has dropped dramatically over the last year: sales sank 47 percent in the second quarter of 2007, then 59 percent in the third quarter and 65 percent in the fourth quarter. However, orders increased to 2,396 in the first quarter from 768 in the first quarter of 2007.

The company received 2,074 orders in the fourth quarter, but swung to a loss due to charges related to a plant closing.

Robert Schenosky of Jefferies raised his rating to "Buy" from "Hold," and increased his target price to $42 per share from $35. He said operating profits, shipments and orders all reached a low point in the first quarter and should get better for the rest of the year.

The stock rose $3.08, or 9 percent, to $37.35 in morning trading.

Schenosky said demand and profits won't increase dramatically, but the stock should rise as results improve. He added that legal issues related to a union grievance are now behind the company.

On Thursday, Freightcar said it will take a one-time charge of $20 million to $24.5 million to end a dispute with the United Steelworkers of America regarding benefits at the company's Johnstown, Pa., plant.