Investopedia: Greenbrier Comes Up Short Again

When last I wrote on Greenbrier (NYSE:GBX), I was, at best, tepid on this manufacturer of rail cars and parts for the railroad industry. Although the environment for railroad capex is pretty solid as major carriers like Union Pacific (NYSE:UNP), CSX (NYSE: CSX), and Norfolk Southern (NYSE:NSC) continue to enjoy solid operating cash flows (despite struggles in the coal business), Greenbrier has long lagged rivals like Trinity (NYSE:TRN) and American Railcar (Nasdaq:ARII) in terms of metrics like margins despite good market share.

Management has been saying the right things about prioritizing margins and reducing the capital intensity of the business. Along those lines, a serious restructuring of the Wheel and Parts business is a good move forward, and the new emphasis on tank cars should pay dividends. But as this quarter proves, this is a company where I think investors need to be careful about giving too much benefit of the doubt ahead of real signs of progress.

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Investopedia: Icahn Has Another Go At Greenbrier

If Bravo ever needs to recast "Millionaire Matchmaker," their producers ought to consider giving Carl Icahn a call, as it seems like Icahn likes nothing more than to try to land opportunistic M&A deals. In his latest attempt, Icahn is proposing (via his listed company Icahn Enterprises LP (Nasdaq:IEP)) that his majority-held American Railcar Industries (Nasdaq:ARII) acquire fellow railcar builder Greenbrier (NYSE:GBX). As is so often the case with Icahn-proposed deals, though, the deal is long on logic and short on value for the selling shareholders.

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Seeking Alpha: Greenbrier's Thorny Valuation

Rail traffic may be a little twitchy these days as coal shipments plunge, but railroads and railcar leasing companies continue to rebuild their fleets after a major plunge during the recession. While Greenbrier (GBX) undoubtedly has a lot to gain from this multi-year cycle, the question of fair value gets a little tricky.

Another Strong Quarter
Certainly Greenbrier is making hay while the sun shines. Revenue jumped 60% this quarter as the company saw a 68% increase in car deliveries. More specifically, the company saw a better than 100% increase in car manufacturing revenue, while wheel service/refurbishment revenue rose about 7% and revenue from the leasing operations rose about 15%.

Profitability also dramatically improved as the company better covers its fixed costs. Reported operating income came close to tripling, while adjusted EBITDA more than doubled. All in all, the company handily surpassed the average sell-side EPS estimate, though the outperformance in revenue was not quite as large.

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Greenbrier's Thorny Valuation

Investopedia: Rail Traffic Suggests A Slower Pace

It's easy to overreact to month-by-month economic data, so any sort of spot analysis has to be taken with a grain of salt. That said, the pace of rail traffic seems to be resetting to a slower but still positive level. That, in turn, suggests that the recovery may have entered a phase where growth will be less impressive but perhaps enough to strike a favorable balance between the market's need for growth and the fears of an overheating economy. (For background reading, see A Primer On The Railroad Sector.)

The Numbers for March 

According to the Association of American Railroads' (AAR) Rail Time Indicators report, U.S. carload traffic in March 2011 rose 3.4% over 2010 and 2% from February 2011. That shows decent growth, but readers should also remember that bad weather earlier in the year curtailed some traffic at that time. Accordingly, it seems like growth is slowing as the year-over-year comps get increasingly difficult.

The numbers for Canada are different (up 0.9% in March 2011 from last year and up 3.7% from February 2011), but close enough to suggest that more or less the same trends are at work.

Intermodal results were a little different; for the U.S. there was 8.5% annual growth from March 2010 to March 2011 and 0.5% sequential growth since February 2011, while in Canada the respective numbers were 2% and -2.1% over the same time periods. (For more on rail stocks, check out Rail Stocks Chugging Right Along.)

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http://stocks.investopedia.com/stock-analysis/2011/Rail-Traffic-Suggests-A-Slower-Pace-UNP-CSX-ADM-GMT-TRN-BRK.A-NSC0429.aspx

Note: Please note, due to an error in the editing process, publication of this piece was delayed about two weeks. 

Rail Traffic Points To An Ongoing Recovery

For the pessimist crowd of economists looking for a double-dip recession, rail traffic is proving to be a decidedly inconvenient truth. With November numbers in hand, it is pretty clear that the industrial sectors of the North American economy are continuing a slow (and decidedly unspectacular) recovery. Although the pace of growth is clearly moderating, traffic and utilization suggests that the major rail carriers can continue to see solid demand for the near future and that is a positive look-through for the economy as a whole. 

The Details of November
According to the Association of American Railroads' Rail Time Indicators, U.S. rail traffic grew 4.5% in November, while intermodal traffic increased 11.3%. On a sequential basis, seasonally adjusted traffic fell 1.1% from October, while intermodal was down 0.4%. It should be noted that an October-November decline is normal and completely consistent with the trend of past years. Once again, though, Canada was even stronger, as rail traffic rose more than 5% and intermodal increased 13%. (For more, see Railroad, Trucking Earnings Growth Set To Keep Rolling.)

Once again, rail traffic performance was broad-based. Although agricultural products and auto traffic were both down, that again is normal for this time of year. In other words, there is no particular reason for investors in Ford (NYSE:F), Toyota (NYSE:TM) or Archer Daniels Midland (NYSE:ADM) to see any bad news in these numbers.

Of more interest to this analyst was the performance of coal. To give investors an idea of just how important coal is to the railroad industry, remember that coal represented 46% of total American railcar traffic in November. So while there are differences between Union Pacific (NYSE:UNP), Norfolk Southern (NYSE:NSC) and CSX (NYSE:CSX) in terms of the exact breakdown of their traffic, coal is important to everybody.


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