Noble says small-cap FreightCar America to be unaffected by trade war

FreightCar America, a railcar manufacturer with a plant in Mexico, has not been affected by Trump’s tariffs, Noble Capital Markets has pointed out in a note. Investors had assumed otherwise, which sent the stock into a tailspin earlier this year. This has made it undervalued, in Noble’s view. The broker now sees nearly 200% upside in the stock.

Noble values FreightCar America at $13.50 per share, almost three times the current market price — on Friday, April 4, the stock closed at $4.64 per share.

For the year to date, FreightCar is down more than 48%. As the company manufactures freight railcars in Mexico, investors have feared it would be affected by U.S. tariffs, Noble explains, but that is actually not not the case. Goods from Mexico and Canada that comply with the USMCA trade agreement between the U.S. and its neighbors are exempt from tariffs — with the exception of cars, steel, and aluminum. FreightCar sources most of its raw materials, including aluminum, in the U.S.

The slide in the share price has made FreightCar undervalued with an attractive risk/reward ratio, Noble writes, arguing that now the stock should go up “as investors are increasingly aware that FreightCar is now liberated from tariff concerns.” Noble recommends buying the stock at this time (rating it “outperform”).

Aside from Noble, only one other analyst covers FreightCar. They also have a “buy” recommendation, with a target price of $14.25 per share.

Last Wednesday, April 2, U.S. President Donald Trump announced new “reciprocal” tariffs on foreign goods. The base rate for all countries is 10%, with goods from China facing a 34% duty on top of the existing 20% rate and the EU being subject to a 20% tariff.

Trump’s announcement triggered a stock market selloff that has now extended into a third consecutive session. Since Wednesday, the S&P 500, which tracks the performance of the largest publicly traded companies in the U.S., has lost 10.5%, while the tech-heavy Nasdaq Composite is down almost 11.5%.

Meanwhile, the small-cap-tracking Russell 2000 index is off 10.7%. On Thursday, it was the first to enter a bear market. As of now, the index has dropped more than 25% versus its peak in November. Small caps had been thought to be among the biggest beneficiaries of Trump’s election.