Footprint Reduction And Cost Optimization Are Key To Greenbrier Companies' Increased EPS In FY25: Analyst

KeyBanc Capital Markets analyst Steve Barger reiterated the Sector Weight rating on Greenbrier Companies GBX.

GBX reported a strong 3Q, driven by excitement around improving margins and a solid preliminary 4Q order book in which the company indicated it already has 7,900 orders.

Barger expects the company to get more orders as the quarter advances, reversing the five-quarter trend of backlog declines. 

The analyst also remains bullish on easing supply chain constraints and cost-savings initiatives contributing to margin expansion in the manufacturing and maintenance segments. 

Overall, the analyst increased estimates driven by a more favorable outlook on margin performance.

For FY23, Barger raised EPS estimate to $3.11 from $2.26 (cons. $2.83). 

Supply chain normalization and cost actions may be helping GBX return to more sustainable margin performance. 

For FY24, the analyst increased FY24 EPS estimate to $3.53 from $2.70 (cons. $3.41).

Barger remains optimistic that GBX will begin making meaningful progress in FY24 towards its $50 million -$55 million cost optimization goal (~$1 million) realized since last quarter's Investor Day), with an additional $15 million - $20 million annual run rate savings beginning in 1Q24.

For FY25, the analyst increased FY25 EPS estimate to $3.65 from $2.86.

As a cost optimization initiative, GBX's recent footprint reduction is expected to benefit EPS by up to ~$1.41-$1.63 in normalized annual EPS by FY25.

Price Action: GBX shares are trading lower by 1.9% to $42.30 on the last check Wednesday.