With the economy on track and with coal and iron ore in hot demand, little-known regional railroad Genesee & Wyoming (GWR) is riding high. Its Big Board-listed stock has chugged up from 27 in June to 38 on Jan. 4. Smart acquisitions and efficient use of assets have delivered steady sales and earnings growth in the past five years. "There is more upside ahead" for this short-line freight carrier -- the second-largest regional railroad in North America, says Richard Steinberg, president of Steinberg Global Asset Management, which owns shares. He sees the stock hitting 45 in six to eight months and 60 in 18 months. Genesee, which transports coal, ore, petroleum, grain, and forest products in North America, Australia, Bolivia, and Mexico, earned an estimated $1.76 a share in 2005, vs. $1.45 in 2004, figures Steinberg, and should earn $2.11 in 2006. Genesee has offset the hike in fuel prices by cutting operating costs. A healthy balance sheet gives it ample opportunity for more acquisitions, notes Art Hatfield of Morgan Keegan, who rates Genesee "outperform." Its growth prospects are looking very good, he says.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial