Greenbrier Cos. CEO optimistic about railroad business
The Greenbrier Cos. (NYSE:GBX) CEO William Furman said the markets in the rail industry “continue to be weak” but he remains optimistic about prospects for the firm, which supplies transportation equipment and services to the railroad industry. Furman made the comments during a midday conference call.
“Overall, car loadings have declined 3% in 2007. This decline is expected to continue in 2008,” Furman said. “However, we are entering this downturn, if that is the appropriate term, in good condition with a strong backlog.”
Greenbrier is “aggressively” managing the concentration risks in its order backlog, Furman said. The company is building cars that are in greater market demand, he said.
“There are some very bright spots in the economy for the railroad business and for railroad suppliers,” Furman said. “Increased fuel prices continue to drive traffic from truck to rail. The lower dollar, while driving commodity prices higher, increases the competitiveness of U.S. exports. We expect growth in those cars, where exports can be served.”
However, the CEO warned that not everything is positive and some risks, particularly in the maintenance sector, exist.
“We are concerned about the movement of railroads toward pushing cost and risk downward in the supply chain at a time when the owners of cars and railroads do not own a majority of these cars and at a time when the supply chain and its owners cannot assume these burdens,” Furman said.
Greenbrier recently terminated a maintenance agreement with a significant customer in order to resist this downward trend, he said.
Before Wednesday’s opening, Greenbrier reported a second-quarter profit of $1.4 million, or $0.09 per share, compared with a net loss of $6.1 million, or $0.38 per share, a year earlier. Although the Lake Oswego, Ore.-based company swung to a quarterly profit, it missed Wall Street analysts’ expectation of earning $0.32 per share.
Excluding expenses related to closing a Canadian facility and other charges, Greenbrier would have earned $0.28 per share during the quarter. No additional charges from the closure are expected to be included in the third-quarter results, Rittenbaum said.
Revenue for the second quarter ended Feb. 29 rose 8% to $260 million from $240 million during the same period of 2007. The consensus estimate of analysts was $275.3 million in revenue.
“This has been a very active quarter,” Furman said. “We are disappointed in the quarter’s results, but I believe in light of the activities that were sustained during the last two quarters, these results are understandable.”
The firm was also negatively affected by a higher quarterly tax rate of 112%. Greenbrier said in a release that it expects a 63% rate for the second half of the fiscal year.
On April, Greenbrier announced that it purchased Roller Bearing Industries, Inc., a 30-year-old supplier of reconditioned wheelset roller bearings to the rail industry.
“While smaller [than other acquisitions], it builds on the platform we already have,” Furman said.
During February, billionaire investor Carl Icahn bought a 9.5% stake in Greenbrier. Furman said Icahn stated an interest in a “possible business combination” with American Railcar Industries Inc. (Nasdaq:ARII). Icahn is a majority stakeholder in ARII, a maker of covered hopper and tank railcars.
“As you can expect, we’ve had some conversations with him on this topic,” Furman said. “We’re not going to comment further at this time and undertake no obligation to update on this subject.”
In afternoon trading, GBX shares are down 4.50%, or $1.19, at $25.25. Shares have ranged between $16.03 and $38.99 over the last 52 weeks.
