Ongoing investment in rail infrastructure is unleashing growing demand for providers in the industry, and railcar maker Greenbrier (NYSE:GBX) is well-positioned to capture the upside and ride the rails to profits. The stock has positive momentum, climbing over 76% in the past year, yet still trades at a decent value. This could make GBX a compelling buy for investors.
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Freight railroads play a significant role in long-distance transportation in the U.S., handling nearly 40% of the country’s freight volume. Despite this, their environmental impact is relatively low, accounting for a mere 1.7% of emissions specific to transportation. Their ability to move one ton of freight close to 500 miles on a single gallon of fuel makes them three to four times more fuel-efficient than trucks.
What to Know About Greenbrier
Lake Oswego, Oregon-based Greenbrier focuses on designing, manufacturing, and marketing railroad freight car equipment. It operates through three primary segments: Manufacturing, Wheels and Parts, and Leasing and Services.
The Manufacturing segment manufactures double-stack intermodal railcars, tank cars, and marine vessels. The Wheels and Parts segment produces railroad accessories and provides wheel and axle maintenance and services. Lastly, the Leasing and Services segment offers railcar management solutions to railroads, shippers, and carriers.
According to the Federal Highway Administration, the U.S. freight industry is projected to grow at a rate of 30%, rising from around 19.3 billion tons in 2020 to approximately 25.1 billion tons in 2040. This forecast presents an attractive market environment for Greenbrier to expand its operations and increase its market share within the freight car manufacturing and services sector.
Greenbrier’s Recent Financial Results & Outlook
The company recently reported Q2 revenue figures of $862.7 million. This exceeded the consensus of $843.28 million, while beating last quarter’s $808.8 million. Earnings per share (EPS) also rose, hitting $1.03, beating a consensus forecast of $0.86 and the previous quarters’ $0.96.
The company received new railcar orders for 5,900 units, which are valued at about $690 million. 5,600 units were delivered, leaving the company with a total railcar backlog of 29,200 units worth approximately $3.6 billion.
The company has announced a $0.30 per share quarterly dividend, to be paid on May 14, 2024, to shareholders recorded as of April 23, 2024. This will be Greenbrier’s 40th consecutive quarterly dividend, a testament to the company’s commitment to returning value to shareholders.
Looking forward to the rest of Fiscal year 2024, the company is forecasting in the $3.5 — $3.7 billion range.
Is GBX a Buy, Hold, or Sell?
The stock has been trending, climbing over 16% YTD. Despite the increase in share price, it still looks to be relatively undervalued. The P/E ratio of 15x compares favorably to the Industrials sector average of 18.2x and the Railroads industry average of 19.4x. Also, the company’s EV/EBITDA of 9.53 sits well below the industry average of 13.51.
Greenbrier is rated a Moderate Buy based on the recommendations and 12-month price targets five Wall Street analysts issued in the past three months. The average price target for GBX stock is $58.25, which represents a 15% upside from current levels.
Bottom Line on GBX
As freight railroads continue to shape the U.S. transportation sector, Greenbrier is well-positioned to leverage this growing demand. The new railcar orders, maintaining a consistent backlog, and ongoing income from quarterly dividends are all attractive characteristics for investors. The railcar maker’s stock has shown a positive price momentum, though it still trades at a decent value. This could make it a compelling investment choice.
