Greenbrier improves FY17 car orders

Railcar builder The Greenbrier Companies reported fourth-quarter revenue of $611.4 million and net earnings of $23.7 million, or 75 cents per diluted share, including a $3.5 million goodwill impairment charge. It also forecasts a stronger market for railcar deliveries and orders in fiscal 2018.

The company, based in Lake Oswego, Ore., said adjusted net earnings for the quarter ended Aug. 31 were $27.3 million, or 86 cents per diluted share. Adjusted pre-tax earnings was $73.3 million, or 12% of revenue.

New railcar deliveries totaled 5,500 units for the quarter. Orders of 2,500 railcars were received during the quarter, valued at $200 million. In September, orders for another 1,400 units were received, valued at $120 million. New railcar backlog as of Aug. 31 was 28,600 units with an estimated value of $2.80 billion.

The company’s board increased the quarterly dividend to 23 cents per share.

For the full fiscal year, net earnings were $116.1 million, or $3.65 per share, including the $3.5 million (11 cents per share) goodwill impairment charge. Adjusted net earnings were $119.6 million, or $3.76 per share, on revenue of $2.17 billion. Adjusted EBITDA for the year was $317.3 million, or 14.6% of revenue.

New railcar deliveries totaled 16,000 units for the fiscal year. Orders exceeded 16,500 units valued at over $1.5 billion across a broad range of railcar types.

Cash provided by operating activities exceeded $280 million for the year.

“Greenbrier delivered strong results for the fourth quarter and fiscal 2017,” said William A. Furman, chairman and chief executive. “This positive financial performance was achieved by successfully executing on Greenbrier’s strategy to foster and grow its North American business, while simultaneously expanding to global markets. Greenbrier’s earnings exceeded our guidance range for fiscal 2017. Aggregate gross margin for the year remained healthy at 19.4%. Operationally, in a competitive North American freight railcar market, Greenbrier added market share during fiscal 2017, receiving orders exceeding 16,500 railcars valued at $1.5 billion – about double the number and value of railcar orders received in fiscal 2016. Management services added approximately 70,000 railcars to its managed fleet in the year and an additional 15,000 railcars post-quarter end. Greenbrier now provides management services for over 20% of the North American fleet.”

Furman added that “Greenbrier’s approach to capital deployment will continue to balance investing in internal projects, funding strategic growth, and returning capital to shareholders.

“The past year was transformative for Greenbrier, as we diversified our business with increased investments in Europe, Brazil and in the Gulf Cooperation Council region. Greenbrier will advance its international agenda further in fiscal 2018. Greenbrier’s backlog…is higher now than at the beginning of fiscal 2017, providing visibility into fiscal 2018 and beyond. Backlog spans almost all railcar types and has grown both internationally and domestically. As we grow Greenbrier’s core North American business and see a larger contribution from international operations, we expect more deliveries to produce greater revenue and higher EPS in fiscal 2018 compared to fiscal 2017.”

Greenbrier in fiscal 2018 expects deliveries of 20,000-22,000 units including Greenbrier-Maxion (Brazil), which will account for up to 10% of deliveries; revenue of $2.4-2.6 billion, and earnings of up to $4 per share.

Cowen and Company Vice President Matt Elkott in a note to investors prior to an earnings call noted Greenbrier’s guidance for FY18 deliveries was above Cowen’s estimate of 16,600 units. “It guided for FY18 of up to $4 (per share), compared to our and consensus estimates of $3.75 and $3.65, respectively. Fiscal 4Q17 gross margin was 16.3%, above consensus of 15.6%. Our estimate was 16.5%. We view the results and guidance favorably.

“We look to gain some clarity on the gross margin, but we believe it will be partly supported by continued tank car deliveries to Saudi Railway for the next three quarters, after which market conditions may have improved further in North America.”