Greenbrier Misses Expectations And Guidance Much Worse

Railcar manufacturer The Greenbrier Companies GBX reported fiscal third quarter 2019 adjusted earnings of $0.89 per share, $0.07 per share light of the NASDAQ consensus estimate of $0.96. The company's adjusted earnings excluded non-recurring expenses for a goodwill impairment charge in its repair division and acquisition costs related to its pending deal with American Railcar Industries (ARI).

The Lake Oswego, Oregon-based company said it received 6,500 new orders for railcars in the quarter valued at $730 million. This increased the company's total railcar backlog to 26,100 units, up 100 units, with a total value of $2.74 billion. GBX delivered 6,500 railcars in the quarter, 900 units higher year-over-year.

"Greenbrier gained the momentum we expected during the quarter, led by improved operating efficiencies in our core North American manufacturing business.  Greenbrier's current and expected performance is consistent with our prior comments that revenue and margin would be back-half weighted this fiscal year. These gains were muted in our overall financial results due to continued weakness in Greenbrier's railcar repair business and certain international operations, along with costs associated with the ARI acquisition," said GBX's Chairman and CEO William A. Furman.

GBX reported a year-over-year revenue increase of 34 percent to $856.2 million in the quarter, with similar revenue gains seen across all three of the company's divisions. The company reported a 12.4 percent gross margin, which was 450 basis points lower year-over-year.  

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $2.5 million lower year-over-year at $84.4 million in the period. The restructuring of its railcar repair network and headwinds in renewing its rail concession in Brazil, which are weighing on the operations of its joint venture there were called out as the reasons for the decline in earnings.

"Greenbrier's Brazil operations are being right-sized for the current demand environment before order activity ramps up as expected in 2020 and over the coming years. Meanwhile, pricing and manufacturing performance in Europe responded more slowly than expected, but is now kicking in. Headwinds from Europe and Brazil are expected to turn to tailwinds in the fourth quarter and beyond, along with other international performance contributions," said Furman.

GBX provided fiscal fourth quarter guidance of 7,000 to 8,000 deliveries, revenue of $1 billion and adjusted earnings per share of $1.30 to $1.50. This compares negatively to the current consensus estimate of $1.90 per share for the company's fiscal fourth quarter 2019.

Management previously provided full-year adjusted earnings guidance of $3.60 to $3.80 per share during its last earnings report. The midpoint of its new fiscal fourth guide suggests full-year earnings of $3.05, lower than the current NASDAQ consensus estimate of $3.62.

In April 2019, GBX announced a $400 million deal to buy the manufacturing unit of its competitor, American Railcar Industries.

GBX will hold a call to discuss these results with analysts and media at 11:00 a.m. EDT.

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