GBRX Ends FY19 With “Positive Momentum”

Written by Andrew Corselli, Managing Editor
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William A. Furman, GBRX Chairman and CEO

The Greenbrier Companies, Inc. (GBRX) reported financial results for its fourth fiscal quarter and year ended August 31, 2019. The former includes record revenue of $914.2 million; the latter, record revenue of $3 billion and a record new railcar delivery total of 23,400 units for the year.

Net earnings attributable to GBRX for the year were $71.1 million, or $2.14 per diluted share, on record revenues of $3 billion. Adjusted net earnings attributable to GBRX for the year were $95.2 million, or $2.87 per diluted share, excluding a non-cash goodwill impairment charge and ARI (American Railcar Industries) acquisition costs.

In addition, GBRX’s FY19 included an adjusted EBITDA of $290.9 million, or 9.6% of revenue; orders of 20,600 units valued at approximately $2.2 billion across a broad range of railcar types, with more than 20% originating internationally; and cash provided by operating activities that exceeded $125 million for the second half of the year.

GBRX 4Q19 Highlights

• Net earnings attributable to GBRX for the quarter were $35.1 million, or $1.06 per diluted share, on record revenue of $914.2 million. Quarterly results include $8.2 million, net of tax, ($0.25 per share) in costs related to the ARI acquisition.

• Adjusted net earnings attributable to GBRX were $43.3 million ($1.31 per diluted share), excluding ARI acquisition costs.

• Adjusted EBITDA for the quarter was $109.4 million, or 12.0% of revenue.

• Record new railcar deliveries totaled 7,300 units for the quarter.

• Diversified orders of 4,900 railcars were received during the quarter, valued at more than $500 million.

• The new railcar backlog was 30,300 units with an estimated value of $3.3 billion. The backlog reflects the transfer of 10,600 units from ARI and the removal of 3,500 small-cube covered hoppers for sand service for which the company realized negotiated economic benefits. The remaining backlog does not include any other orders for the sand market.

• The Marine backlog exceeds $100 million and extends through calendar year 2020.

• The Board declared a quarterly dividend of $0.25 per share, payable on Dec. 4, 2019 to shareholders of record as of Nov. 13, 2019.

• A dividend yield approximately 3.1% as of Oct. 24, 2019.

“Greenbrier ended its fiscal 2019 with positive momentum,” William A. Furman, GBRX Chairman and CEO, said. “We enter fiscal 2020 supported by solid railcar order activity and improvements in operational areas that caused headwinds in 2019. We are pleased that in the fourth quarter, both deliveries and earnings met expectations. A robust backlog exceeding 30,000 units, valued at more than $3 billion, combined with a healthy balance sheet, provides optionality for the future. Greenbrier’s strategy remains focused on four elements: 1) reinforcing core North American markets, 2) executing on our international strategy while improving profitability, 3) robust development of the talent pipeline, and 4) continuing to grow the business at scale.”

“Recent progress and opportunities in Europe and other international markets are positive. We are optimistic about long term success in these markets,” Furman added. “In North America, we completed the largest acquisition in Greenbrier’s history in late July. We have been actively welcoming new colleagues and integrating the new manufacturing operations. We expect to generate approximately $15 million in synergies in fiscal 2020, consistent with our initial expectations. The ARI acquisition adds talent in manufacturing, engineering and other fields. With this long-contemplated transaction now complete, Greenbrier is one of the largest freight railcar builders and railcar service providers in the world.”

Business Outlook

Based on current business trends and production schedules for fiscal 2020, GBRX believes:

• Deliveries will be around 26,000-28,000 units, including Greenbrier-Maxion (Brazil), which will account for approximately 2,000 units.

• Revenue will be approximately $3.5 billion.

• Diluted EPS of $2.60-$3.00, excluding approximately $20-$25 million of pre-tax integration and acquisition-related expenses from the ARI acquisition.

Cowen Insight

“FY20 EPS guidance of $2.60-$3.00 is below our and consensus estimates of $3.75 and $3.41, respectively,” according to Cowen and Company analysts Jason H. Seidl (Managing Director and Railway Age Wall Street Contributing Editor), Matt Elkott and Adam Kramer. “Fiscal 4Q19 results are a top-to-bottom miss to our and Street estimates. While the light results and guidance come amid well-documented weak freight conditions, we believe the stock will experience volatility and could come under pressure near-term following a nearly 50% run since late August.”

“GBRX provided FY20 production guidance of 26K-28K railcars, including 2K for Brazil’s Greenbrier-Maxion,” the analysts noted. “This compares to our estimate of 27.95K units. The company projects $3.5 billion in revenue, compared to our and Street expectations of $3.7 billion and $2.9 billion, respectively. EPS is expected to be $2.60-$3.00, compared to our and consensus estimates of $3.75 and $3.41, respectively.”

“Fiscal 4Q19 EPS was $1.31, below our and Street estimates of $1.45 and $1.38, respectively,” they said. “This brought the full-year EPS to $2.87, below our and consensus estimates of $3.10 and $3.04, respectively, and below the company’s twice-lowered guidance (latest FY19 guidance of $2.95-$3.15 was issued on July 2). Fiscal 4Q19 adjusted EBITDA was $109.4 million, compared to our and consensus estimates of $115.8 million and $115.9 million, respectively. Revenue was $914.2 million, also below our and Street expectations of $998.5 million and $959.9 million, respectively. The gross margin was solid at 14.6%, compared to our estimate of 14.3% and consensus of 15.0%.

“Fiscal 4Q19 orders and deliveries of 4,900 units and 7,300 units were solid, but below our estimates of 6,550 units and 7,600 units, respectively.”

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