Greenbrier Posts $9M Loss In 2Q; Shares Drop 7%

Shares of The Greenbrier Companies fell sharply by 7% in morning trading on April 6 as the freight equipment and services supplier reported disappointing fiscal 2Q results with a net loss of $9 million.

Greenbrier Companies (GBX) posted a net loss of $0.28 per diluted share in the fiscal second quarter versus earnings per diluted share of $0.41 in the same quarter last year. Analysts were expecting a loss of $0.37 per share in 2Q.

Greenbrier Companies’ Chairman & CEO, William Furman commented, “Greenbrier navigated what we expect will be our most challenging quarter of the fiscal year.  Operating challenges emerged from a range of sources, including winter weather, impacting deliveries and production.  Our near-term outlook is becoming increasingly optimistic as rail fundamentals improve.”

“Proposed environmental and other regulations in both North America and Europe should support secular demand for rail as a growing mode for freight transport. Fiscal stimulus and proposed infrastructure legislation are expected to further add to demand,” Furman added.

GBX’s revenues also declined sharply by 52.6% year-on-year to $295.6 million in 2Q. The company’s deliveries of equipment fell 37% quarter-on-quarter hit by weak demand and extreme winter weather. GBX incurred COVID-19 related expenses in fiscal 2Q of $2.5 million (pre-tax) and $6.4 million (pre-tax) for 1H FY21.

The company stated that it expects the second half of FY21 to be better than the first half as a result of rising production and stronger activity across its business. At the end of the fiscal second quarter, GBX had total liquidity of $708 million and with another $100 million of liquidity initiatives in progress.

Separately, the company also formed GBX Leasing, a special purpose subsidiary, to own and manage leased railcars primarily built by GBX. This subsidiary will acquire $200 million worth of newly-built and leased railcars every year from Greenbrier. (See Greenbrier Companies stock analysis on TipRanks)

Following the 2Q results, Cowen & Co. analyst Matt Elkott reiterated a Buy rating and a price target of $50 (11.2% upside) on the stock. Elkott said in a research note, “Fiscal 2Q21 results were a big miss to our and Street estimates. We see this in part as a reflection of demand weakness in past periods and weather disruptions in the quarter.”

“Orders and the order ASP [average selling price] came in 12% and 26% above our estimates, respectively. The ongoing improvement in freight and rail equipment fundamentals bodes well for GBX in the second fiscal half and next year,” Elkott added.

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 2 analysts suggesting a Buy and 1 analyst recommending a Hold. The average analyst price target of $46.33 implies around 3% upside potential to current levels.

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