The Greenbrier Companies, Inc. (GBX) isn’t a household name but this Zacks Rank #1 (Strong Buy) is in one of the hottest industries: railcars. Earnings are expected to rise double digits this year and next as the backlog expands.
Greenbrier builds railroad cars in 4 facilities in the U.S. and Mexico and also builds marine barges at its U.S. manufacturing facility. Internationally, it builds and refurbishes freight cars for the European market through its Polish operations.
It also reconditions, manufactures and sells railcar parts at 4 U.S. sites.
Big Beat in the Fiscal Third Quarter
On July 2, it was another solid quarter for Greenbrier as it easily crushed the Zacks Consensus Estimate by 39%. Earnings were $1.03 versus the Zacks Consensus of $0.74. This was more than double the second quarter earnings of $0.50.
Third quarter gross margin jumped to 16.3% from 11.5%, well outpacing the company’s guidance of a minimum of 13.5%.
It delivered 4,300 units in the quarter and received orders for another 15,600 railcars with a value of $1.65 billion.
Its backlog grew to 26,400 railcars valued at $2.75 billion. It also had a Marine backlog of $110 million.
It was also optimistic about its joint venture with Watco Companies to form GBW Railcar Services which will allow the companies to repair and refurbish tank cars at 38 sites across North America. Tank car regulations are driving the industry right now as the federal government is set to issue new regulations about the cars shortly.
Bullish Guidance
With the big backlog and the large beat in Q3, it’s not surprising that Greenbrier provided a very bullish forecast for the fiscal fourth quarter.
Revenue is expected to increase 4-6% with fiscal 2014 deliveries between 15,700 units and 16,000 units.
Earnings are expected to be in the range of $2.98 to $3.08 which was well below the Zacks Consensus which was $2.62.
The analysts immediately moved their estimates higher to the upper end of the guidance range, with 7 estimates being raised for fiscal 2014 and 8 increasing for fiscal 2015.
Earnings are expected to rise 53% in fiscal 2014 and another 30% in fiscal 2015.
Shares Have Been on a Tear
Investors have been piling into the railcar stocks. Greenbrier’s shares have more than tripled over the last year.
Does that mean it’s too late to get in?
Greenbrier trades with a forward P/E of 23.5 which isn’t cheap but you’re paying for that double digit earnings growth.
Greenbrier is also in a hot industry. The Transportation- Equipment & Leasing industry is ranked in the top 7% of all Zacks industries.
If you’re looking for a transportation stock that is a fast-growing name, Greenbrier is one you should keep on your short list.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.
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