Genesee & Wyoming: All Aboard

For an owner and operator of short-line freight railroads, Genesee & Wyoming (GNWR ), based in Greenwich, Conn., is all over the map: It moves coal in Illinois, New York, and Pennsylvania. It transports grain and iron ore in Australia, forest products in Bolivia, and oil in Mexico. On Wall Street, it has delivered impressive results despite the recession: "A strong balance sheet, surging free cash flow, and yearly earnings growth of 15% to 20% have been Genesee's allure," says Dennison Veru of Palisades Capital Management, which owns 8% of the shares. Because of lack of institutional following, the stock, now at 22, has yet to sell at the price-earnings ratios of big railroads. Its p-e is just 12 but deserves the 15 to 16 of its peers, says Veru. Analyst Thom Albrecht of BB&T Capital Markets says Genesee's planned acquisition of Utah Railway, mainly a coal carrier, could add 12 cents to 14 cents to Genesee's earnings per share, bringing it to $1.89 in 2003, vs. an estimated $1.58 in 2002. Genesee earned $1.48 in 2001 on sales of $174 million. Albrecht rates Genesee a strong buy, with a 12-month price target of 30.

By Gene G. Marcial

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