Greenbrier (GBX)

Rail transportation company Greenbrier (NYSE:GBX) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 11.7% year on year to $762.1 million. The company’s full-year revenue guidance of $3.25 billion at the midpoint came in 9.6% below analysts’ estimates. Its GAAP profit of $1.56 per share was 12.4% 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).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Greenbrier’s sales grew at a sluggish 2.1% compounded annual growth rate over the last five years. This was below our standards and is a rough 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 1.7% 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 3,100 in the latest quarter. Over the last two years, Greenbrier’s units sold averaged 15.7% 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 missed Wall Street’s estimates and reported a rather uninspiring 11.7% year-on-year revenue decline, generating $762.1 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 1.2% over the next 12 months. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below the sector average.

Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.

Greenbrier has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 13.3% gross margin over the last five years. That means Greenbrier paid its suppliers a lot of money ($86.73 for every $100 in revenue) to run its business.

Greenbrier produced a 18.2% gross profit margin in Q1, marking a 4 percentage point increase from 14.2% in the same quarter last 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 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 6.2% 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 8.3 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, Greenbrier generated an operating profit margin of 11%, up 3.6 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.

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 23.8% compounded annual growth rate over the last five years, higher than its 2.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Greenbrier’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Greenbrier’s operating margin expanded by 8.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we 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 131% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q1, Greenbrier reported EPS at $1.56, up from $1.03 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. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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 5.2%, meaning it lit $5.17 of cash on fire for every $100 in revenue.

Taking a step back, we can see that Greenbrier’s margin dropped by 12 percentage points during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. Almost any movement in the wrong direction is undesirable because it’s already burning cash. If the longer-term trend returns, it could signal it’s becoming a more capital-intensive business.

Greenbrier’s free cash flow clocked in at $26.3 million in Q1, equivalent to a 3.5% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump 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 6.6%, 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. Over the last few years, Greenbrier’s ROIC has increased. This is a good sign, and we hope the company can continue improving.

Greenbrier reported $263.5 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 $522.3 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 $68.1 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 struggled to find many positives in these results as its revenue, EPS, and EBITDA missed Wall Street’s estimates. Greenbrier also lowered its full-year revenue guidance. Overall, this was a weaker quarter. The stock remained flat at $44.50 immediately following the results.

Updated: May 21, 2025 at 11:18 PM EDT

Before deciding whether to buy Greenbrier or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

Greenbrier doesn’t pass our quality test. 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 growth in unit sales was surging, the downside is its projected EPS for the next year is lacking. On top of that, its cash profitability fell over the last five years.

Greenbrier’s EV-to-EBITDA ratio based on the next 12 months is 6.6x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $49 on the company (compared to the current share price of $44.84).

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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