Greenbrier (GBX)

Rail transportation company Greenbrier (NYSE:GBX) announced better-than-expected revenue in Q2 CY2025, with sales up 2.7% year on year to $842.7 million. The company’s full-year revenue guidance of $3.25 billion at the midpoint came in 1.1% above analysts’ estimates. Its non-GAAP profit of $1.86 per share was 88.8% above analysts’ consensus estimates.

Company Overview

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 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.

Competitors of Greenbrier include Trinity (NYSE:TRN), FreightCar America (NASDAQ:RAIL), and private company American Railcar Industries (which was acquired by ITE Management).

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Greenbrier’s 2.9% annualized revenue growth over the last five years was sluggish. This was below our standards and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Greenbrier’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 4.5% annually. Greenbrier isn’t alone in its struggles as the Heavy Transportation Equipment industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can dig further into the company’s revenue dynamics by analyzing its number of units sold, which reached 3,900 in the latest quarter. Over the last two years, Greenbrier’s units sold averaged 12% year-on-year growth. Because this number is better than its revenue growth, we can see the company’s average selling price decreased.

This quarter, Greenbrier reported modest year-on-year revenue growth of 2.7% but beat Wall Street’s estimates by 7.3%.

Looking ahead, sell-side analysts expect revenue to decline by 9.3% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.

Greenbrier has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 13.5% gross margin over the last five years. Said differently, Greenbrier had to pay a chunky $86.51 to its suppliers for every $100 in revenue.

Greenbrier’s gross profit margin came in at 18% this quarter, up 2.9 percentage points year on year. Greenbrier’s full-year margin has also been trending up over the past 12 months, increasing by 4.5 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Greenbrier was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.3% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Greenbrier’s operating margin rose by 10.6 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Greenbrier generated an operating margin profit margin of 11%, up 2.2 percentage points year on year. Since its gross margin expanded more than its operating margin, we can infer that leverage on its cost of sales was the primary driver behind the recently higher efficiency.

We track the long-term change 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 is profitable.

Greenbrier’s EPS grew at an astounding 18.2% compounded annual growth rate over the last five years, higher than its 2.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Greenbrier’s earnings to better understand the drivers of its performance. As we mentioned earlier, Greenbrier’s operating margin expanded by 10.6 percentage points over the last five years. On top of that, its share count shrank by 3.9%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Greenbrier, its two-year annual EPS growth of 64.4% 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 $1.86, up from $1.06 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

While Greenbrier posted positive free cash flow this quarter, the broader story hasn’t been so clean. Greenbrier’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 6.1%, meaning it lit $6.13 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Greenbrier’s margin expanded by 3 percentage points during that time. Despite its improvement and recent free cash flow generation, we’d like to see more quarters of positive cash flow before recommending the stock.

Greenbrier’s free cash flow clocked in at $56.5 million in Q2, equivalent to a 6.7% margin. Its cash flow turned positive after being negative in the same quarter last year, marking a potential inflection point.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Greenbrier historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.6%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Greenbrier’s ROIC has increased over the last few years. This is a good sign, and we hope the company can continue improving.

Greenbrier reported $296.8 million of cash and $1.76 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $547.2 million of EBITDA over the last 12 months, we view Greenbrier’s 2.7× net-debt-to-EBITDA ratio as safe. We also see its $51.9 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Greenbrier blew past analysts’ sales volume expectations this quarter. We were also excited its EPS outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 11.2% to $52.31 immediately after reporting.

Updated: July 10, 2025 at 11:39 PM EDT

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Greenbrier, you should also grasp the company’s longer-term business quality and valuation.

Greenbrier isn’t a terrible business, but it isn’t one of our picks. For starters, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its expanding operating margin shows the business has become more efficient, the downside is its projected EPS for the next year is lacking. On top of that, its cash burn raises the question of whether it can sustainably maintain growth.

Greenbrier’s EV-to-EBITDA ratio based on the next 12 months is 5.8x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $53.50 on the company (compared to the current share price of $55.46).