Greenbrier optimistic as 2024 comes into view

Despite macroeconomic uncertainties, rail equipment manufacturer The Greenbrier Companies sees “steady production” supporting the company as it heads into its 2024 fiscal year.

“I would say for 2024, we’ve got really good visibility. We still do have some pockets where we have open production, but we feel very comfortable about the ability to fill up that space,” said President and CEO Lorie Tekorius during Greenbrier’s earnings call last Thursday to discuss fiscal third-quarter 2023 results.

“Right now what we’re seeing in North America is pretty steady production coming out of where we’re going to close out the fourth quarter. We don’t have any big ramp ups or any big ramp downs — we’ll have some adjustments. But some of the recent orders that we’ve received really give us great visibility and continuity on a number of our production lines,” she continued.

Greenbrier’s rail car orders have consisted of “strong diverse demand across a number of customers, car types, commodities and a nice healthy combination of lease originations, as well as direct sales,” Tekorius said.

Greenbrier (NYSE: GBX) is also seeking to ramp up production in Europe, albeit at smaller volumes than in North America, Tekorius said. But that production in Europe “will be one of the benefits to our deliveries in our fiscal 2024.” The company is also seeking to build up rail car leasing opportunities in Europe.

In the meantime, Greenbrier’s maintenance services continue to see “positive momentum, despite ongoing labor challenges,” Tekorius said, and improved pricing volume operating efficiencies are expected to occur through the end of Greenbrier’s 2023 fiscal year, which will end Aug. 31.

“We’ve laid the foundation for expanded leasing strategy. This is an important component of our multiyear plan and is expected to result in the doubling of recurring revenues within the next five years,” Tekorius said in prepared remarks. “The market backdrop for leasing remains very positive and we’re in a great position to execute our plan.”

Greenbrier is continuing with some of its longer-term plans announced during an April investor day, such as bringing fabrication in-house for basic primary parts and subassemblies. The first phase of this work will be completed in the fourth quarter and could result in between $50 million and $55 million in fiscal 2025, Tekorius said.

The manufacturer also completed its sale of Gunderson Marine Portland in the third quarter, which could result in annual savings of $15 million to $20 million, Tekorius continued. Meanwhile, the Gunderson rail facility also completed its last rail car on May 18.

Fiscal 3rd-quarter 2023 results

New rail car orders in the third quarter totaled 4,600 units and were valued at $650 million. Deliveries totaled 6,600 units. Greenbrier’s fiscal third quarter ended May 31.

“Orders continue to be broad based and diverse across most railcar types, with the exception of intermodal,” said Brian Comstock, chief commercial and leasing officer.

As of May 31, Greenbrier’s rew rail car backlog was 23,400 units, with an estimated value of $2.9 billion.

“Despite weakness in freight volumes, the rail car demand environment remains stable due to pent-up replacement demand and tight supply. And we continue to see healthy rail car inquiries and orders for a variety of rail car types,” Comstock said.

Lease rates on renewals are also increasing by double digits, Comstock said, and fleet utilization is nearly 90%.

Adjusted net earnings were $34 million, or $1.02 per adjusted diluted share, for the fiscal third quarter of 2023, compared with $33.8 million, or 99 cents per adjusted share, for the fiscal second quarter of 2023.

Greenbrier also announced recently that Pat Ottensmeyer, former president and CEO of Kansas City Southern, joined the company’s board of directors.

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