Greenbrier: Customers support the railroad despite economic, political headwinds

Despite the backdrop of macroeconomic and global political uncertainty, most shippers and railroads today are more focused on easing railroad congestion, executives with railcar manufacturer Greenbrier said during the third-fiscal- the company’s quarter earnings call on Monday.

“I think everyone has an eye on the finish line. And everyone is smart in what they do. Our customers, you know, aren’t necessarily as focused on the recession as they are focused on trying to bring the product to markets, ”Brian Comstock, chief commercial and leasing officer, said in the call Monday. “The truck market is pretty crowded. They’re having issues. The railroad speed is tight. And so there are still a lot of restrictions in the supply chain. That’s really what people are focusing on, how can we market our product? And how do we get a part in the train? “

When U.S. rail congestion weakens, railroad manufacturers and renters could ultimately benefit because the focus of Greenbrier’s customers and others will put goods on the railroad due to the railroad’s lower carbon footprint and relatively efficiency, said Greenbrier President and CEO Lorie Tekorius.

“I would say that our feeling on the state of the market is cautiously optimistic…. When you go deeper into the headlines, we see the need for some shippers to add equipment to the railroads to be able to ship more products through the railroads, ”Tekorius said.

He also said that rental utilization remained stable at 98%: “I think that’s another indicator that the market is using all the equipment they can have, and when there’s a bit better fluidity in the metals. , you’re likely to see more equipment being brought in. ” Equipment aging and the need to switch to better and newer rail equipment with improved technology could also be another positive market for Greenbrier (NYSE: GBX), he said.

Tekorius noted during the Greenbrier revenue call that railcar production increased in Greenbrier’s primary North American market in the quarter, resulting in an expansion of the workforce of more than 1,500 people. Conversely, production slowed in Europe amid the war in Ukraine and triggered a pause in order activity, even as customers began to get orders again, executives said.

“We believe that current challenges to the North American rail system, such as network congestion, present opportunities for our business in the coming months,” Tekorius said. “Strong customer inquiry and the shipper’s perspective are encouraging indicators of future order activity and leasing performance. Our backlog is diversified across different types of railcar and extends smoothly up to the calendar 2023. “

3rd quarter results

Net revenues for Greenbrier in the third quarter of fiscal 2022 were $ 3.1 million, or 9 cents per diluted portion, compared to $ 12.8 million, or 38 cents per diluted portion, in the same quarter of 2021. The third ended part of Greenbrier’s finances on May 31.

The company attributes the decline in revenue each year to the timing of fleet sales.

Despite the decline in revenue, Greenbrier’s revenue rose 16% to $ 793.5 million on higher deliveries and by passing on input value increases in Greenbrier’s manufacturing segment. The company has also seen an increase in volume in its maintenance services segment. Gross margin rose 39% to $ 76.3 million amid increased deliveries and improved operational efficiencies in its manufacturing and maintenance services segments, despite the effects of the war in Ukraine serving as a headwind.

Revenue costs rose from $ 375 million to $ 717.2 million amid a 109% increase in manufacturing costs.

Greenbrier noted that its new railcar backlog of 30,900 units is worth $ 3.6 billion, which is the highest value in six years, while lease fleet utilization is 98%.

In the third quarter, new railcar orders reached 5,000 units, valued at $ 670 million, with orders mainly coming from North America as Europe navigated the ongoing effects of the war on Ukraine, said Greenbrier. The company also delivered 5,200 units in the quarter.

Greenbrier has a railcar repair backlog of 3,100 units, costing more than $ 220 million.

“In Europe, the war triggered a pause in order activity after securing orders for 2,300 railcars in the first two quarters of our fiscal year. In recent weeks, consumers have been returning to the market. in Europe and our sales pipeline is active. Hire and Maintenance Services syndications have helped balance our quarterly results, emphasizing the value of Greenbrier’s diverse business activity, “Tekorius said in a release. “Uncertainty in the U.S. economy remains an ongoing challenge, but our operations continue to build momentum. When faced with a difficult exterior, Greenbrier has a proven ability to create value through our combined platform. “

Furman said goodbye

The earnings call on Monday was also the last one attended by Bill Furman, executive chair, co-founder, and former president and CEO. Furman announced his departure last fall.

Furman will retain responsibility for certain line functions until Aug. 31, the end of Greenbrier’s financial year. His appointment to the board will continue until January 2024.

“I feel privileged to have enjoyed a long tenure at Greenbrier. The extended careers that have led to publicly traded companies today are very rare,” Furman said. “I thank our board of directors and our shareholders for their trust in me throughout the season.”

Subscribe to FreightWaves e-newsletters and get the latest freight insights right in your inbox.

Click here for more FreightWaves articles by Joanna Marsh.