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Greenbrier (NYSE:GBX) Reports Sales Below Analyst Estimates In Q2 Earnings, Stock Drops


Jabin Bastian /
2024/07/08 8:45 am EDT

Rail transportation company Greenbrier (NYSE:GBX) missed analysts' expectations in Q2 CY2024, with revenue down 21% year on year to $820.2 million. On the other hand, the company's outlook for the full year was close to analysts' estimates with revenue guided to $3.55 billion at the midpoint. It made a GAAP profit of $1.06 per share, improving from its profit of $0.63 per share in the same quarter last year.

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Greenbrier (GBX) Q2 CY2024 Highlights:

  • Revenue: $820.2 million vs analyst estimates of $920.9 million (10.9% miss)
  • Full year revenue guidance lowered to $3.55 billion from $3.60 billion previously (slight miss vs current analyst estimates)
  • EPS: $1.06 vs analyst expectations of $1.13 (6.2% miss)
  • Gross Margin (GAAP): 15.1%, up from 12.3% in the same quarter last year
  • Free Cash Flow was -$49.8 million compared to -$23.1 million in the previous quarter
  • Sales Volumes rose 37% year on year (-8% in the same quarter last year)
  • Market Capitalization: $1.51 billion

"Greenbrier continued positive momentum in the third quarter of fiscal 2024," said Lorie L. Tekorius, CEO and President.

Having designed the industry’s first double-decker railcar in the 1980s, Greenbrier (NYSE:GBX) supplies the freight rail transportation industry with railcars and related services.

Heavy Transportation Equipment

Heavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.

Sales Growth

A company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Unfortunately, Greenbrier's 4.6% annualized revenue growth over the last five years was sluggish. This shows it failed to expand in any major way and is a rough starting point for our analysis. Greenbrier Total Revenue

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Greenbrier's annualized revenue growth of 15.6% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

Greenbrier also reports its sales volumes, which reached 6,300 in the latest quarter. Over the last two years, Greenbrier's sales volumes averaged 22.9% year-on-year growth. Because this number is better than its revenue growth, we can see the company's average selling price decreased. Greenbrier Year-On-Year Volume Growth

This quarter, Greenbrier missed Wall Street's estimates and reported a rather uninspiring 21% year-on-year revenue decline, generating $820.2 million of revenue. Looking ahead, Wall Street expects sales to grow 2.4% over the next 12 months, an acceleration from this quarter.

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Operating Margin

Greenbrier was profitable over the last five years but held back by its large expense base. It demonstrated paltry profitability for an industrials business, producing an average operating margin of 5.3%. This isn't too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Greenbrier's annual operating margin might have seen some fluctuations but has generally stayed the same over the last five years, which doesn't help its cause.

Greenbrier Operating Margin (GAAP)

In Q2, Greenbrier generated an operating profit margin of 8.8%, up 3.9 percentage points year on year. This increase was encouraging, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with its general expenses like sales, marketing, and administrative overhead.

EPS

We track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.

Greenbrier's EPS grew at a remarkable 13.2% compounded annual growth rate over the last five years, higher than its 4.6% annualized revenue growth. However, this alone doesn't tell us much about its day-to-day operations because its operating margin didn't expand.

Greenbrier EPS (GAAP)

Diving into Greenbrier's quality of earnings can give us a better understanding of its performance. A five-year view shows that Greenbrier has repurchased its stock, shrinking its share count by 3.5%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings. Greenbrier Diluted Shares Outstanding

Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Greenbrier, its two-year annual EPS growth of 49.5% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q2, Greenbrier reported EPS at $1.06, up from $0.63 in the same quarter last year. Despite growing year on year, this print missed analysts' estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Greenbrier to grow its earnings. Analysts are projecting its EPS of $3.76 in the last year to climb by 15.4% to $4.34.

Key Takeaways from Greenbrier's Q2 Results

Greenbrier's revenue unfortunately missed and its EPS fell short of Wall Street's estimates. The company also lowered its full year revenue guidance at the midpoint, which is never a good sign. Overall, this was a bad quarter for Greenbrier. The stock traded down 6.3% to $45.50 immediately after reporting.

Greenbrier may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.