Railcar Maker Greenbrier Sees Quarterly Earnings Fall From 2015
Greenbrier Cos. reported earnings of $35.4 million, or $1.12 per share, in the fiscal third quarter ended May 31, a 17.4% drop from the $42.8 million, or $1.33, in the prior year period.
The company blamed declines in railcar leasing and purchasing for lower earnings, the company said in an earnings call July 6.
Year-over-year numbers show the rail freight, similar to the trucking industry, is suffering from an oversupply and not enough demand. Greenbrier, based in Lake Oswego, Oregon, reported that revenue dropped to $612.9 million from $714.6 million in the same quarter last year.
The earnings report beat analyst estimates for the third quarter, which projected the company’s net income at $35.1 million or $1.10. But Greenbrier also laid off 800 employees, the company said, calling it a “tightening of our belts.”
“We posted strong operational and financial results in the quarter, particularly in light of growing industry headwinds,” said William Furman, chairman and CEO. “As North American rail markets adjust to lower railcar loadings and increased rail velocity, we will focus on this core business while growing our earnings base in select international markets where long-term demand for railcars is strong.”
New railcar deliveries dropped 4.4% to 4,300 units, reflecting an industry-wide drop in freight activity. Research firm Stephens Inc. reports intermodal freight volume is lower for all six major publicly traded Northern American rail companies through June 25 compared to last year during the same period. New railcar backlog at Greenbrier dropped 8.5% to 31,200 units with an estimated value of $3.6 billion.
“The backlog helps a lot because it gives us momentum with a steady cash flow, but it all depends a great deal on order rates for the next year. Our order rates are dramatically below, for the industry and Greenbrier, what we had achieved during the energy boom,” said Furman.
Overall, intermodal volume for rail is down 2.6% compared to the same period, according to Stephens Inc. The largest decreases, including carload shipments, in rail volume are in petroleum, down 18.1%, and coal, down 13.6%.
Greenbrier also believes operating margins will come down in the future after it rose from 17.9% to 20.7% in sequential orders, and increased from 14.6% during the third quarter of 2015.
“Over the next several quarters, we should see margins staying in the mid to upper teens,” said Lorie L. Tekorius, senior vice president and treasurer. “In a normalized market, and I’d say we’re still not in a normalized market, our manufacturing margins would be in the mid to upper teens.”
Greenbrier forecasts $2.8 billion in revenue at the end of the fiscal year on Aug. 31 and $5.70 and $5.90 in earnings per share, lower than forecasts earlier in the year. Tekorius said the adjustment reflects lower railcar production rates in the softer market. Last fiscal year Greenbrier reported $2.6 billion in revenue and $197 million in net income, or $5.93 per share.
