Release Date: April 07, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Greenbrier Companies Inc (GBX, Financial) reported strong core net earnings of $56 million or $1.73 per share, reflecting improved operating efficiency.
- The company achieved an impressive aggregate gross margin of 18.2%, marking the sixth consecutive quarter at or above mid-teens target.
- Greenbrier Companies Inc (GBX) increased its quarterly dividend by nearly 7% to $0.32 per share, demonstrating confidence in its long-term strategy.
- The global new railcar backlog remains robust at over 20,000 units, providing excellent visibility for managing production lines and revenue outlook.
- The leasing and fleet management operation continues to grow, with recurring revenue reaching $157 million, a 39% growth over two years.
Negative Points
- The company is experiencing reduced deliveries from European facilities due to the rationalization of a facility in Romania.
- There is a slight reduction in aggregate gross margin expected during the back half of the fiscal year.
- The macroeconomic landscape is challenging, with fluctuating trade policies and tariffs impacting input costs, particularly steel.
- Production rates in North America are being adjusted due to backlog management and customer delivery needs, impacting delivery expectations.
- The company is facing a higher tax rate of 32% due to discrete items related to the Mexican peso.
Q & A Highlights
Q: Can you explain the downshift in production and its impact on margins?
A: Lorie Tekorius, CEO, explained that the reduction in production is partly due to the closure of a facility in Europe and adjustments in North American production rates based on customer needs. Despite this, the company is increasing its aggregate gross margin and operating margin expectations, focusing on driving more to the bottom line in various markets.
Q: How are tariffs affecting production costs and leasing returns?
A: Lorie Tekorius stated that Greenbrier is not subject to tariffs due to US MCA compliance. However, market uncertainty is affecting demand. The company has navigated tariff escalations before and includes pass-through language in contracts to mitigate impacts. Brian Comstock added that leasing rates are holding steady, and the company is well-positioned to manage any potential impacts.
Q: How is the syndication market reacting to the current environment, and what visibility do you have into future sales?
A: Brian Comstock noted that the syndication market remains robust and liquid, with strong interest from partners. Lorie Tekorius added that investors view these assets as long-term investments, looking past current market conditions. Justin Roberts mentioned that timing of car builds affects syndication, but the market remains liquid with strong demand for good leases.
Q: Can you provide insights into the secondary market for lease-attached cars?
A: Brian Comstock reported that the secondary market is strong, with high renewal interest and stable rates. The fleet has compressed since COVID, creating a tight market with an aging fleet, which bodes well for both new originations and renewals.
Q: Why was CapEx guidance lowered, and what areas are being affected?
A: Michael Donfris explained that the reduction in CapEx is due to better visibility into the production schedule and syndication plans. Lorie Tekorius added that while there is a slight pullback in lease fleet investment, it is primarily due to timing of production and capitalization. The company remains disciplined in its approach to fleet investment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
