Greenbrier Analyst Slashes Estimates Post Q1 Results To Reflect Continued Operational Headwinds

  • KeyBanc analyst Steve Barger maintained Sector Weight on Greenbrier Companies, Inc GBX. GBX shares saw a sharp decline following its F1Q23 results and call.
  • Barger wrote that a sizable margin and EPS miss drove the decline in the quarter despite steadily improving revenue per car over the past six quarters. 
  • These results met with broad manufacturing and supply initiatives designed to improve efficiency, which could catalyze better results in the coming quarters. 
  • While this is a disappointing quarter in the context of a modest but persistent upcycle, perhaps the more important takeaway is how little patience investors will have for operational missteps in an environment of higher rates and cycle concerns.
  • Barger reduced the FY23 EPS estimate to $2.15 from $2.71 (consensus $2.55). 
  • The revision reflects higher revenue from higher ASP and car but a lower margin. 
  • Barger also reduced the FY24 EPS estimate to $2.71 from $3.09 (consensus $2.95). The estimate reduction reflected higher revenue from higher ASP offset by lower margin expectations. 
  • GBX primarily drives margin expansion by improving its manufacturing footprint and managing supply chain costs.
  • GBX's actions include investing in bringing critical component fabrication in-house; ceasing railcar production at its Portland, OR, facility; and conducting a strategic evaluation of its Marine business. 
  • The analyst thinks these are steps in the right direction but remain concerned about the timing of potential benefits relative to macro concerns. 
  • Barger sought a more straightforward path to consistency before becoming more constructive.
  • Price Action: GBX shares traded higher by 1.64% at $29.13 on the last check Monday.
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