Greenbrier (GBX)

Rail transportation company Greenbrier (NYSE:GBX) fell short of the market’s revenue expectations in Q3 CY2025, with sales falling 27.9% year on year to $759.5 million. The company’s full-year revenue guidance of $2.95 billion at the midpoint came in 6.5% below analysts’ estimates. Its GAAP profit of $1.16 per share was 1.7% below 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 can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Greenbrier’s 3% annualized revenue growth over the last five years was sluggish. This was below our standard for the industrials sector and is a poor baseline 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 9.4% 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.

Greenbrier also reports its number of units sold, which reached 2,400 in the latest quarter. Over the last two years, Greenbrier’s units sold averaged 21.1% year-on-year declines. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, Greenbrier missed Wall Street’s estimates and reported a rather uninspiring 27.9% year-on-year revenue decline, generating $759.5 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 1.5% over the next 12 months. Although this projection implies its newer products and services will spur better top-line performance, it is still below the sector average.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Greenbrier has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 13.9% gross margin over the last five years. That means Greenbrier paid its suppliers a lot of money ($86.12 for every $100 in revenue) to run its business.

This quarter, Greenbrier’s gross profit margin was 18.9%, in line with the same quarter last year. Zooming out, Greenbrier’s full-year margin has been trending up over the past 12 months, increasing by 3 percentage points. If this move continues, it could suggest better unit economics due to some combination of stable to improving pricing power and input costs (such as raw materials).

Greenbrier was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.6% 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 8.8 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 9.5%, down 2.3 percentage points year on year. Since Greenbrier’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Greenbrier’s EPS grew at an astounding 33.9% compounded annual growth rate over the last five years, higher than its 3% 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 declined this quarter but expanded by 8.8 percentage points over the last five years. Its share count also shrank by 1.6%, and these factors together 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 86.1% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Greenbrier reported EPS of $1.16, down from $1.92 in the same quarter last year. This print slightly missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because 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 7%, meaning it lit $7.02 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Greenbrier’s margin expanded by 9.8 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 $26.7 million in Q3, equivalent to a 3.5% margin. The company’s cash profitability regressed as it was 7.7 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends trump temporary fluctuations.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared 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 6.9%, 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. Fortunately, Greenbrier’s has increased over the last few years. This is a good sign, and we hope the company can continue improving.

Greenbrier reported $306.1 million of cash and $1.75 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 $498.9 million of EBITDA over the last 12 months, we view Greenbrier’s 2.9× net-debt-to-EBITDA ratio as safe. We also see its $41.8 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’ EBITDA expectations this quarter. On the other hand, its revenue, EPS, and full-year guidance for both metrics missed. Overall, this was a softer quarter. The stock traded down 6% to $42.54 immediately following the results.

Updated: December 3, 2025 at 10:38 PM EST

Before making an investment decision, investors should account for Greenbrier’s business fundamentals and valuation in addition to what happened in the latest quarter.

Greenbrier isn’t a terrible business, but it isn’t one of our picks. To begin with, 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 rising cash profitability gives it more optionality, 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 P/E ratio based on the next 12 months is 11.1x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $43.67 on the company (compared to the current share price of $45.69).