Greenbrier off to “strong start”

The Greenbrier Companies Inc. on Jan. 6 reported financial results for its first fiscal quarter ended Nov. 30, 2016. The company said it is off to a strong start, with net earnings of $25.0 million, or $0.79 per diluted share, on revenue of $552.3 million.

Adjusted EBITDA for the quarter was $85.7 million, or 15.5% of revenue. Cash provided by operating activities totaled $29.0 million for the quarter. Diversified orders for 2,400 new railcars were received during this quarter, valued at more than $230 million, or an average price of approximately $98,000 per railcar. The new railcar backlog as of Nov.r 30, 2016 was 25,800 units with an estimated value of $2.97 billion (average unit sale price of $115,000). Included in backlog are 3,800 covered hopper railcars for use in energy related sand transportation, of which 2,500 units, scheduled for production in 2018, are for a customer who is negotiating with Greenbrier to modify the order.

New railcar deliveries totaled 4,000 units for the quarter, compared to 4,600 units for the quarter ended Aug. 31, 2016. The Marine backlog as of Nov. 30, 2016 was approximately $103 million. The company’s Board declared a quarterly dividend of $0.21 per share, payable on Feb. 16, 2017 to shareholders as of Jan. 26, 2017. Greenbrier is also negotiating to exercise its option to increase its equity position in Brazilian railcar manufacturing joint venture, Greenbrier-Maxion, to 60%.

William A. Furman, Chairman and CEO, said, “Greenbrier’s fiscal 2017 is off to a strong start with solid financial performance delivered during a demanding first quarter. We had healthy manufacturing margins on lower deliveries, a testament to the strength of our manufacturing and leasing operations. We continue to execute on our strategy of focusing on our core North American operations while pursuing targeted investments in international markets.

“Brazil’s economic, business and political conditions have improved and forecasts indicate continued GDP improvement in 2017. Greenbrier’s operations in Brazil and our relationship with our partners continue to grow. For the quarter ended Nov. 30, 2016, our Brazilian railcar manufacturing joint venture Greenbrier-Maxion received orders and awards for more than 2,000 railcars, which are not included in Greenbrier’s reported orders. We have accelerated discussions to increase our interest in the Brazil operations with an incremental investment of nearly $24 million, which will be used to pay down high cost debt. Our facilities in Brazil include the largest railcar assembly plant in South America along with a castings facility. The need for high quality transportation equipment is poised to grow based in part on railcar fleet demographics with a high percentage of the fleet being older or obsolete.

“As we pursue investments in growth opportunities, our solid financial returns in our core business in North America and internationally along with our strong balance sheet remain critical. These provide us the flexibility to compete effectively today while continuing to invest domestically and internationally for tomorrow. In addition, changes in the global trade environment will require robust risk management.

“Based on our first quarter results, regular communications with customers and current production schedules in North America, we are reaffirming our guidance for the year. We will continue to seek opportunities to diversify by accessing new global markets, while streamlining our cost structures to maximize profitability in North America.”

Based on current business trends, industry forecasts and production schedules for fiscal 2017, Greenbrier believes that deliveries will be approximately 14,000-16,000 units. Revenue will be $2.0-$2.4 billion. Diluted EPS will be in the range of $3.25 to $3.75.

“Greenbrier’s adjusted EBITDA was largely in line with our estimate and well above consensus,” said Cowen and Company analyst Matt Elkott. “Deliveries were just above our estimate, and orders of 2,400 railcars exceeded our 2,100-unit forecast. The ending backlog was just slightly above our estimate, and the backlog value and ASP were largely in line with our projections. The backlog includes 2,500 frac sand cars under order modification negotiations.

“The company’s maintained $3.50 FY17 EPS guidance midpoint is in line with our estimate (established July 7), which is above the street estimate of $3.37. The consensus estimate has fluctuated quite a bit in the last couple of quarters, going from above our aforementioned estimate to well below it recently. The company’s affirmed guidance midpoint for FY17 railcar deliveries is also in line with our model projection of 15,000 units. The revenue guidance midpoint of $2.20 billion is also in line with our estimate and above consensus of $2.06 billion. We view these results fairly favorably as the company beat consensus on revenue, gross margin, operating income, and EBITDA. It also received solid orders and maintained its guidance. The EPS miss appears to be largely attributable to a loss from unconsolidated affiliates. What is likely to concern investors is more questions regarding the remaining frac sand cars in the backlog. GBX noted that its backlog includes 3,800 frac sand cars, of which 2,500 units, scheduled for production in 2018, are for a customer who is negotiating with the company to modify the order. In fiscal 4Q16, GBX removed 1,200 frac sand cars from its backlog but received a negotiated payment from a customer.

“GBX received orders for 2,400 railcars in fiscal 1Q17, compared to our estimate of 2,100 units and 2,300 units in fiscal 4Q16. Deliveries were 4,000 units, compared to our 3,900-unit estimate and 4,600 units in fiscal 4Q16. This puts the railcar backlog at the end of November at 25,800 units, compared to our estimate of 25,500 units and 27,500 units at the end of 4Q16. For fiscal 1Q17, GBX reported Adjusted EBITDA of $85.7 million, vs. our and consensus estimates of $85 million and $71 million, respectively. Fiscal 4Q16 EBITDA was $104.3 million. Revenue came in at $552.3 million, compared to our and street projections of $547.4 million and $489.4 million, respectively. Fiscal 4Q16 revenue was $595.1 million. Operating income was $72.7 million, vs. our and consensus estimates of $67.9 million and $56.9 million, respectively. Fiscal 4Q16 operating income was $83.5 million. The gross margin was 20.4%, compared to our 19.6% estimate and the 18.1% consensus forecast. The fiscal 4Q16 gross margin was 20.1%.”