Shares of Greenbrier Cos. (GBX) slid more than 10% last week, despite continued margin strength and resilient execution in fiscal Q2. Barring a severe economic downturn, which we foresee as unlikely at present, the nearly 40% drawdown in price since late January brings shares back into accumulation territory, counsels John Buckingham, editor of The Prudent Speculator.
The railcar manufacturer posted EPS of $1.69, up 68% year-over-year, supported by an aggregate gross margin of 18.2% — the sixth consecutive quarter at or above the mid-teens hurdle set by management. Operating income climbed 42% to nearly $84 million, even with $6 million in European rationalization costs from the planned closure of a facility in Romania.
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Greenbrier Cos. (GBX)
Greenbrier delivered 5,500 new railcars and secured 3,100 orders valued at nearly $400 million. The global backlog stands at 20,400 units worth an estimated $2.6 billion. Leasing and fleet management continue to scale as a stable income stream, with recurring revenue reaching $157 million over the last 12 months, up 39% from two years ago.
Management reiterated its intent to invest up to $300 million annually in leasing, subject to disciplined return thresholds. CEO Lorie Tekorius emphasized the company’s adaptability amid trade policy volatility, pointing out that Greenbrier’s North American operations are USMCA-compliant and not subject to proposed tariffs.
While steel costs are rising due to upstream tariff effects, Tekorius stated, “Thanks to our excellent procurement team, we have confidence in our ability to protect margin from the most immediate impact on our supply chain.”
Indeed, despite lowering delivery expectations, Greenbrier raised its full-year margin guidance. Gross margin is now expected at 17% to 17.5%, and operating margin at 10.2% to 10.7% — up 100 basis points from prior forecasts. Ms. Tekorius further highlighted that the company’s contracts include pass-through provisions, mitigating tariff-driven cost pressure.
Cash flow from operations came in at $94 million for the quarter, driving total liquidity to $752 million, including $264 million in cash. Return on invested capital rose to 12.4%, solidly within the company’s 10%-to-14% target range. The board approved a 7% dividend increase to $0.32 per share, marking the 44th consecutive quarterly payout. The $100 million share repurchase authorization remains in place.
