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Greenbrier Earnings: An Early Look

By Dan Caplinger - Apr 2, 2013 at 11:12AM

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Can the railcar builder tap into the huge demand for train transport?

The new earnings season is about to begin, but a few companies on off-quarter fiscal years are just now getting around to reporting their quarterly results. Greenbrier (GBX -3.42%) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Railroads have enjoyed a renaissance in recent years, as high fuel costs have made trains a more energy-efficient way to transport goods. Greenbrier doesn't run a railroad, but it provides the train-cars and other equipment that railroads need in order to operate. Let's take an early look at what's been happening with Greenbrier over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on Greenbrier

Analyst EPS Estimate

$0.37

Change From Year-Ago EPS

(35%)

Revenue Estimate

$442.9 million

Change From Year-Ago Revenue

(3.3%)

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Will Greenbrier run off the rails this quarter?
Analysts have had mixed thoughts about Greenbrier's earnings prospects in recent months. They reduced their calls for the quarter that ended in February by $0.03 per share, but they upped their full-year fiscal 2013 estimates by the same amount. The stock, meanwhile, has soared, rising nearly 40% just since the beginning of the year.

The big drama for Greenbrier during the last quarter has come from rival American Railcar's (NASDAQ: ARII) buyout bid for the company. With activist investor Carl Icahn involved in both companies, American Railcar's bid of $20 per share back in December sent Greenbrier shares soaring, and now, Greenbrier's stock trades well above that figure. Greenbrier CEO William Furman said that he's open to discussions about consolidation, but so far, no deal has been accepted.

But just last week, Greenbrier gave investors a taste of how much business activity it has seen recently. The company reported that it had gotten orders for 5,400 railcars with a total value of about $575 million. Nearly half of those orders were for tank cars, showing the importance of the energy industry to Greenbrier's sales. Burlington Northern and Canadian National Railway (CNI -2.15%) have both taken advantage of transportation bottlenecks to key energy-producing areas to offer rail-based transport, and Greenbrier stands to benefit from the demand.

The big question is whether pipeline development will end oil and gas producers' flirtations with rail. Greenbrier thinks producers will stick with rail regardless, and Phillips 66's (PSX -2.25%) deal to bring Bakken crude by rail to a New Jersey refinery is just the latest in extensive activity to move energy products.

In its quarterly report, watch for updates on the company's strategic plans, as well as more on its chances of going forward as an independent business. Even with the buyout bid having pushed share prices higher, Greenbrier's valuation looks attractive here as long as it can continue to perform on a fundamental level.

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Stocks Mentioned

The Greenbrier Companies, Inc. Stock Quote
The Greenbrier Companies, Inc.
GBX
$42.66 (-3.42%) $-1.51
Phillips 66 Stock Quote
Phillips 66
PSX
$95.52 (-2.25%) $-2.20
Canadian National Railway Company Stock Quote
Canadian National Railway Company
CNI
$112.70 (-2.15%) $-2.47

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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