GBX Fiscal 1Q21: ‘Strong Liquidity,’ $2.35B Backlog

Written by Marybeth Luczak, Executive Editor
“Greenbrier remains focused on sustaining a high level of liquidity and carefully managing our manufacturing footprint in order to continue to generate operating cash flow,” Chairman and CEO William A. Furman said.

“Greenbrier remains focused on sustaining a high level of liquidity and carefully managing our manufacturing footprint in order to continue to generate operating cash flow,” Chairman and CEO William A. Furman said.

The Greenbrier Companies, Inc. (GBX), in its first fiscal quarter ended Nov. 30, 2020, reported a net loss of $10 million, attributable to the company, in what continues to be a “challenging market environment.” GBX noted it has been successful in maintaining cash flow and liquidity—“essential components” of its operating strategy—and its diversified $2.35 billion new railcar backlog of 23,900 units—including orders for 2,900 railcars in the quarter, valued at $260 million—“provides a baseload of activity as we gain greater visibility into customer needs as the year unfolds.”

Among the company’s first-quarter highlights:

• GBX reported liquidity of $810 million, including $725 million in cash and $85 million of available borrowing capacity. When combined with $150 million of additional initiatives in progress, the total was $960 million.

• New railcar deliveries in the quarter were 3,100 units, “representing a nearly 1.0x book-to-bill,” according to the company.

• Net loss attributable to GBX for the quarter was $10 million, or $0.30 per diluted share, on revenue of $403 million.

• Adjusted EBITDA for the quarter was $23 million, or 5.8% of revenue.

• The Board has extended the $100 million share repurchase program through January 2023, the company reported.

GBX Chairman and CEO William A. Furman

“Greenbrier remains focused on sustaining a high level of liquidity and carefully managing our manufacturing footprint in order to continue to generate operating cash flow,” Chairman and CEO William A. Furman said. “Consistent with these goals, we ended the quarter with a strong cash position while meaningfully lowering our debt during the quarter [$80 million reduction]. Our prior cost reduction initiatives, combined with inventory and syndication activity, produced solid cash flow in the quarter. Although a challenging operating environment persists at least through the first half of fiscal 2021, our $2.35 billion backlog provides a baseload for our manufacturing operations and visibility into forward production requirements. We will continue to adjust our manufacturing footprint based on our outlook, while also ensuring we do not constrain our ability to scale capacity as demand increases. New order inquiries continue as rail traffic increases and velocity declines. This positions us well for the market improvements we expect later in calendar 2021. Finally, our strategic actions over the past two years, particularly the acquisition of ARI in the U.S., have delivered results. We have reduced our costs and secured our position as a market leader on three continents, especially in our core North American market.”

Commenting on its business and 2021 outlook, the company reported that its “scale and capabilities have significantly broadened since the Great Recession.” GBX noted that its backlog today is “more than five times larger than it was as of the end of 2010. Our stronger market position is reflected in our share of North American industry railcar orders in the first nine months of calendar year 2020 and in the diverse types of railcars we are building. In Europe, broad macroeconomic reforms to address climate change are ushering in an era of modal shift for freight as the continent moves from polluting and congested road travel to clean and efficient rail service. This should generate significant market growth in the years to come. Regulatory-driven freight wagon demand in Europe supplements the increase in commodity-driven and replacement freight wagon demand that typically gathers momentum in a recovering economy.”

More details can be found on the GBX website.

The Cowen Insight

Cowen and Company OEM Transportation Analyst Matt Elkott

“Fiscal 1Q21 results were a miss to our and Street estimates,” Cowen and Company OEM Transportation Analyst Matt Elkott reported. “Deliveries and gross margin fell short of our expectations, while orders were 32% above our estimate. The results affirm our near-term caution, but we would view today’s likely weakness as a unique buying opportunity.”

Key takeaways from Cowen:

• “Adjusted fiscal 1Q21 loss/sh of $0.30 compared to the consensus loss/sh of $0.07 EPS and our estimate of EPS of $0.01. Revenue of $403MM was below our and Street forecasts of $532.8MM and $481.0MM, respectively. Deliveries of 3,100 units fell short of our estimate of 3,900 units.

• “The table below details the fiscal 1Q21 results versus our and consensus estimates and prior periods.

• “Orders came in at 2,900 units, above our estimate of 2,200 units, above the 2,800 units received in the prior fiscal quarter, but below the same quarter last year of 4,500 units.

• “GBX ended the quarter with liquidity of $810MM, including $725MM in cash and $85MM of available borrowing capacity. The company noted that, combined with $150MM of additional initiatives in progress, liquidity should total $960MM.

• “GBX extended its $100MM share repurchase program through January 2023.”

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