Monday, February 03, 2025
Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Tariffs. Pursuant to the International Emergency Economic Powers Act, the Trump Administration is implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. The tariffs are effective on February 4. Energy resources from Canada will have a lower 10% tariff. The action is intended to hold Mexico, Canada, and Mexico accountable for their promises of halting illegal immigration and preventing fentanyl and other drugs from entering the United States. The ad valorem duties do not appear to consider the origin of raw materials or to be subject to exemption.
Exposure. In 2021, FreightCar moved its manufacturing activities in the United States to a new state-of-the-art facility in Castanos, Mexico. It steadily grew production capacity to 5,000 rail cars per year with the addition of a fourth production line during the fourth quarter of 2023. Importantly, the company’s competitors, Greenbrier Companies (NYSE-GBX) and Trinity Industries (NYSE-TRN), also have significant manufacturing operations in Mexico that serve the U.S. market.
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