An Eye on Earnings Report: Greenbrier Companies Inc (NYSE: GBX)

On Wednesday, Greenbrier Companies Inc (NYSE: GBX) stock recorded daily change of 1.75% to close at $26.1 with the total traded volume of 597652 shares along average volume of 656184 shares. 52-week range of the stock remained $ 12.89 – 34.3 while its day low price was $26.01 and it hit its day high price at $26.85. Its previous closing value stands at $25.65. GBX total market capitalization is $738.11M.

The Greenbrier Companies, Inc. (GBX) recently stated financial results for its third fiscal quarter ended May 31, 2020.

Third Quarter Highlights

Achieved $1B liquidity target through combination of cash, borrowing capacity, and spending reductions. Liquidity consists of $735.3M in cash and accessible borrowing capacity of $136.8M; lower capital expenditures of $50.0M, reduced annualized selling and administrative expense of $30.0M and reduced annualized overhead expense of $65.0M .

Generated operating cash flow in excess of $220.0M in the quarter from decreases in working capital and robust syndication activity. This offset a working capital increase in the first six months of the year, resulting in nine months year-to-date operating cash flow of $89.0M.

Diversified new railcar backlog as of May 31, 2020 was 26,700 units with an estimated value of $2.7B, including orders for 800 railcars valued at about $65.0M received during the quarter.

Net earnings attributable to Greenbrier for the quarter were $27.8M, or $0.83 per diluted share, on revenue of $762.6M. Net earnings include a $2.5M, net of tax, ( $0.08 per share) of integration related expenses from the American Railcar Industries (ARI) acquisition and $4.8M , net of tax, ( $0.14 per share) of severance expenses.

Adjusted net earnings attributable to Greenbrier for the quarter were $35.1M, or $1.05 per diluted share, not including $7.3M, net of tax, ($0.22 per share) of integration and severance expenses.

Effective tax rate of 41.2% in the quarter reflects unfavorable discrete items influenced by exchange rate volatility.

Adjusted EBITDA for the quarter was $99.9M, or 13.1% of revenue.

Board declares a quarterly dividend of $0.27 per share, payable on August 19, 2020 to shareholders as of July 29, 2020.

Business Update & Outlook

The COVID-19 pandemic has crystalized Greenbrier’s strategy for the balance of fiscal 2020 and into fiscal 2021. Most importantly, we are protecting our employees from its spread within the work environment.  Since forming an incident response team to address the then-emerging crisis in late February, we have worked diligently to protect employees from the spread of COVID-19 while working in Greenbrier facilities. To date, a small fraction of our total workforce of over 13,000 employees have tested positive. We are very happy that all affected employees have or are predictable to recover. Community spread of COVID-19 has increased in recent weeks in many areas where we operate, requiring additional vigilance and employee communications. We are working toward maintaining a low incident rate of COVID-19 among our employees by remaining focused on their health and enhancing the preventative and remedial actions of the rapid response teams across the company.

We are also preserving the near-term and longer-term financial health of Greenbrier in response to the economic consequences of the pandemic. Maintaining cash flow and liquidity are essential components of Greenbrier’s current operating strategy. We have addressed our cost structure by reducing operating expenses and capital expenditures. Selling and administrative expenses for the quarter were $49M and we expect further reductions in the fourth fiscal quarter. We have also executed a temporary restructuring of the GIMSA joint venture to improve profitability and cash flow for the partners. Depending on production scheduling, this restructuring alone could provide over $40M of cash to Greenbrier through the first half of fiscal 2021 with an accompanying boost to earnings.

Greenbrier continues its manufacturing rationalization programs across our North American production network in response to current levels of demand. In the first three quarters of the year, we closed 11 rail productions lines and continue adjusting capacity to align with the demand outlook. As a result of these actions, total employment in North America has been reduced by about 40%, or about 5,300 employees, including both staff and production employees at the end of the third quarter. Despite these pressures, Greenbrier’s Manufacturing business delivered a total of 5,900 units in the quarter. Based on current backlog, we are left with minimal open production capacity for the remainder of both the fiscal and the calendar year.

GBX has a gross margin of 13.20% and an operating margin of 6.00% while its profit margin remained 1.90% for the last 12 months. Its earnings per share (EPS) expected to touch remained -44.60% for this year while earning per share for the next 5-years is expected to reach at 7.00%.