Greenbrier posts solid second quarter results

Written by Carolina Worrell, Senior Editor
image description

The Greenbrier Companies, Inc. on April 5, 2016 reported financial results for its second fiscal quarter, which ended Feb. 29, 2016.

Net earnings for the quarter were $44.9 million, or $1.41 per diluted share, on revenue of $669.1 million. Adjusted EBITDA for the quarter was $108.2 million, or $15.2% of revenue. The new railcar backlog as of the quarter’s end was 34,100 units with an estimated value of $4 billion (average unit sale price $116,000), compared to 36,000 units with an estimated value of $4.1 billion (average unit sale price of $115,000) as of the close of the company’s first fiscal quarter, which ended Nov. 30, 2015.

Greenbrier received diversified orders for 3,000 new railcars during this quarter, valued at nearly $130 million, on an average price of approximately $103,000 per railcar. New railcar deliveries totaled 4,500 units for the quarter, compared to 6,900 units for the first quarter. Marine backlog as of Feb. 29, 2016 was approximately $18 million.

Greenbrier’s board declared a quarterly dividend of $0.20 per share payable on May 4, 2016 to shareholders of record as of April 13, 2016. This marks the seventh straight quarterly dividend, the company says. Repurchased 533,061 shares of common stock at a cost of $13.3 million during the quarter. Board authorization for approximately $88 million remains available for further share repurchases. Subsequent to quarter end, Greenbrier formed a 50/50 joint venture with Sumitomo Corporation of Americas to establish a leading axle machining facility on West Coast.

Greenbrier’s second quarter aggregate gross margin, excluding the syndication of a railcar portfolio acquired in the first quarter, was 20%, consistent with the company’s goal of at least 20% gross margin by the second half of fiscal 2016. The syndication generated high rates of return; however, the margin percentage had a dilutive impact, resulting in aggregate gross margin of 17.9%.

Second quarter annualized ROIC of 31% continues ROIC performance above 25% for the second consecutive quarter. “We expect to maintain or exceed our 25% ROIC target for the second half of fiscal 2016,” Greenbrier says.

William A. Furman, Chairman and CEO said, “Greenbrier delivered solid results again this quarter across all business units. Our leasing and management services business profitably syndicated the majority of the 4,000-railcar portfolio acquired in our first quarter. We continue to manage these assets and earn fee income, deriving the benefits of our strong balance sheet and integrated model. Based on our current outlook, we remain on track to achieve our fiscal 2016 guidance for deliveries, revenue and diluted EPS.”

Furman added, “Greenbrier has transformed itself through the ongoing contributions of our employees and partners. Over the past five years, we have refined our business model and as industry demand moderates and customer requirements shift to different railcar types, Greenbrier is well positioned. In recent years, we have diversified our product mix, and launched new high-value products while developing a low cost, flexible, international manufacturing base. Our aftermarket businesses in railcar repair, wheels and parts provide ongoing stability. In an extension of our aftermarket business, I am pleased to announce that we have formed GBSummit, a 50/50 joint venture with Sumitomo Corporation of Americas. When it opens in early 2017, GBSummit will be the preeminent axle machining location on the US West Coast that supports growing intermodal rail activity and will create value for our customers and partners.”

Furman concluded, “Greenbrier is adapting well to the present industry and economic climate. We enjoy a diversified backlog, with non-energy related railcars representing 83% of our total backlog. Our healthy backlog and our integrated business model, unique in the industry, position us for steady performance into 2017 and beyond. Greenbrier has a strong balance sheet and we will continue to strategically invest globally in assets and projects generating high rates of return while returning capital to shareholders.”

Based on current business trends and production schedules for fiscal 2016, Greenbrier narrows previously provided guidance for:

• New railcar deliveries to be approximately 20,000 – 22,000 units.

• Revenue to exceed $2.8 billion.

• Diluted EPS in the range of $5.70 to $6.10.

Greenbrier says it expects financial results to be weighted toward the first half of the year primarily due to line changeovers, product mix changes and lower production rates on certain lines in the second half of fiscal 2016.