GBX reported earnings today. They missed Wall Street’s expectations, but the share price rose regardless. This was the only article I could find about it:
http://www.thestreet.com/story/13519633/1/greenbrier-gbx-sto…
I picked up some shares a few weeks ago. I didn’t buy them for the short -term (I very rarely, if ever, do that), and I plan to hang onto them. But I"m wondering whether anyone on this board who owns shares is concerned.
I was hoping to present this information in a way that adds more value, but I’m going on vacation tomorrow and I just haven’t taken the time to digest it, but since I am the one who (re-)brought up GBX a couple weeks ago, I feel like I want to at least put it out there:
Here’s a very meaty Seeking Alpha article I found…it is an incredibly long analysis. I’m not sure how good it is because I’ve barely dipped a toe in. It seems to subscribe to a David Gardner-esque “many possible futures” for GBX: http://seekingalpha.com/article/3962978-greenbrier-companies…
I listened to the conf call yesterday but I was distracted and working the whole time. The tone was great – Furman is a trip, actually – and they seem unworried and just taking care of business. To me it was interesting, but there wasn’t that much new. They actually missed a bit on revenue and earnings, but maybe the market was expecting worse! I feel like the story is still all about orders that may or may not come in, determining their future. I wasn’t expecting any big reveal of new orders or anything (those are typically announced in press releases http://www.gbrx.com/media-resources/press-releases/) and there wasn’t any such reveal – at least not any that I heard.
Some things I don’t understand: other than new orders, how will they make money in the future? They talk about leases, maintenance, refurbs, etc, but I have NO IDEA how to quantify any of it. Maybe the answers are in plain sight – feel free to point them out to me. But I just don’t understand the business as much as I would like. And I guess I’m not as motivated to try as I am with some others. But this strikes me as a much more complex business model than an LGI Homes or Fitbit.
I’m not 100% sure where this leaves me. I guess I just need to keep considering whether this is a company I want to keep up with. But I do think this quarter’s results and the reaction to them prove that the company had/has almost nowhere to go but up. I could be DEAD WRONG about that, so I’m keeping my position small. I had even trimmed it some before earnings (obviously wish I hadn’t now) but I think I’ll leave it that way unless I figure this company out a little better.
Clearly I’m all about full disclosure, ha. Please feel free to ignore my ramblings.
I’d be interested to hear from anybody who has a better take on this company than I do.
Some things I don’t understand: other than new orders, how will they make money in the future? They talk about leases, maintenance, refurbs, etc, but I have NO IDEA how to quantify any of it. Maybe the answers are in plain sight – feel free to point them out to me. But I just don’t understand the business as much as I would like. And I guess I’m not as motivated to try as I am with some others. But this strikes me as a much more complex business model than an LGI Homes or Fitbit. I’m not 100% sure where this leaves me. I guess I just need to keep considering whether this is a company I want to keep up with. But I do think this quarter’s results and the reaction to them prove that the company had/has almost nowhere to go but up. I could be DEAD WRONG about that, so I’m keeping my position small. I had even trimmed it some before earnings (obviously wish I hadn’t now) but I think I’ll leave it that way unless I figure this company out a little better.
Hi Paul, Here’s what I got out of the Conference Call.
they seem to be a dominant player in rail car construction, with 30% of the market. This is a lot more than they used to have. When demand goes down like this, they can capture more of the market. When demand goes way up, their order book is filled two are three years ahead, so some customers will go to dodgy, second level builders, and their percent will drop, even though their absolute numbers go way up.
they see the current downturn as a return to normal, and the wild slew of orders from the oil boom as an aberration.
They have a backlog of 34,000 cars, 87% of which are not energy related.
They figure that if they keep shipping 4000 cars per quarter and bring in 3000 orders, while that’s a lot less orders than they were getting at the peak (15,600 orders at the peak one quarter in 2014), that backlog will last them a long time (8 years, as I figure it), plenty long enough for the market to come back.
They reaffirmed that they’d make about $6.00 this calendar year. (At today’s price, even after the big rise today, their PE would still be 4-something.
they are repurchasing half a million shares at least each quarter.
they’re expanding internationally
I agree with you that this is much more complicated than LGIH.
I agree with you that I’m keeping my position very small (1.0%). Contrary to what you did, I did not sell any before earnings.
I agree with you that this company probably has nowhere to go but up.
I’m still keeping my position very small.
Hope this helps!
Saul
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That does help, Saul. Esp points 1 and 4. I had not thought about the backlog in that way – it’s powerful. 8 years…nice.
Just a note – my position was a lot bigger than yours, percentage wise. It’s still twice as big (2% of my portfolio). I think that’s about where I want it. I mean, it’s welcome to grow, of course. 
Just throwing this idea out there, but has anybody thought about the potential long term impact of automated trucks on railroads?
Because I see “road trains” of trucks driving inches apart (slipstream drag reduction) with few human drivers to pay. Nor will they have to pay much for road use. The political power (and campaign funding) of the trucking industry already allows them to pay far less than what they should be paying on a road damage or usage basis
Meanwhile trains will have to pay for right of way maintenence.
Freight trucks cause 99% of wear-and-tear on US roads, but only pay for 35% of the maintenance.
http://truecostblog.com/2009/06/02/the-hidden-trucking-indus…
Trucking companies will leap on the automated driving bandwagon ASAP, paying human drivers being a annoying nuisance to them.
When will this happen? Estimates are all over the place but I believe sooner than most think. Additionally I see eventual electrification of trucks lowering maintenance and fuel costs.
Train automation for monitoring and control is already being implemented today to allow more efficient management of railroads. Ie. Faster and closer together.
I’m not following your point. Are you asking if this automation of vehicles is going to threaten the future of gbx? I think we are still a long way off from removing train cars from the transportation industry.
An an energy efficiency basis trucks aren’t even close to trains, and never will be.
Even with truck automation you have to consider the type of freight being transported via truck vs train. Certain goods will simply never be transported on the roads.
Mauser,
What will stop trains from becoming completely automated and have electrical engines also? I would think it would be easier to make an electrical train than a truck just because once a train gets up to speed it is pretty easy to keep it going at that speed. I think the trains will always have an upper leg on trucks. But now if you were to talk about electrical cargo planes that could land horizontal, well I could see the trains being phased out.
Andy
And trains are less energy efficient than water. Barges.
A "truck train"with only one driver per 10 trucks will allow for lots for cost cutting. Trucks have been displacing rail for the last 60 years for non bulk items and automated highways will speed that up. At some unknown date.
“Certain goods will simply never be transported on the roads.” and certain goods will switch when trucking gets cheaper.
No doubt there will always be a mix but that does not say that the mix will remain the same as it is today.
http://www.treehugger.com/cars/drafting-behind-trucks-does-i…
In scaled wind-tunnel tests, driving 100 feet behind a semi at 55 mph will reduce drag on your car by 40%. The drag reduction increases as you approach the bumper of the truck until you get a 93% drag reduction at a distance of 2 feet.
computerized interstate automated truck driving might allow less than 2 ft distance between trucks and aerodynamic drag is the overwhelming factor in electric vehicle efficiency at speed.
It even brings up the possibility of a lead truck with a hybrid turbine engine and electric drive producing most of the power needed on the highway ,and other trucks in the train using battery alone on the highway(little power needed) and for low milage city delivery later.
Never thought this would necessarily be happening within an average investment holding period.
I suppose trains could be automated too. But they already have far fewer “drivers” per train than trucks so railroads would save less on labor costs.
A "truck train"with only one driver per 10 trucks will allow for lots for cost cutting. Trucks have been displacing rail for the last 60 years for non bulk items and automated highways will speed that up. At some unknown date.
“Certain goods will simply never be transported on the roads.” and certain goods will switch when trucking gets cheaper.
Even though barge is even cheaper than rail, my lookout on the Tennessee River suggests it is mostly coal and rock rip rap and some other low value bulky stuff.
http://www.treehugger.com/cars/drafting-behind-trucks-does-i…
In scaled wind-tunnel tests, driving 100 feet behind a semi at 55 mph will reduce drag on your car by 40%. The drag reduction increases as you approach the bumper of the truck until you get a 93% drag reduction at a distance of 2 feet.
Actually I foresee a hybrid motive power much like today’s locomotives , a turbine or diesel driving a generator/alternator, driving electric motors. The lead truck in a truck convoys separated by less than a foot would furnish most of the power needed for expressway travel, individual trucks could peel off for local travel where a battery might be enough.
Will this happen within a typical "Saul Investor " investment horizon? Probably not.
No doubt a mix of transport means will continue, but that does not mean the proportions will remain static.
I do believe automated driving will be more disruptive than most think. Anything that moves in a complex enough environment to need human control is at risk.
Lots of jobs are going away.
While the truck train sounds interesting driving down the highway, there are certainly challenges at any stop and at each end. When the driver in the front truck needs a bathroom break, it is going to be interesting parking and restarting the train.
do believe automated driving will be more disruptive than most think. Anything that moves in a complex enough environment to need human control is at risk.
Lots of jobs are going away.
I agree and automated driving is going to reach far into the economy. It’s going to be very disruptive.
Andy
Andy,
Trains are currently driven by electric motors. The diesel engine turns a generator which supplies electrical energy to the motor which drives the train.
The “Truck Train” is an interesting concept, and no doubt some form of it will be implemented. But there is a major sticking point. Pavement represents a shared roadway. There will still be human driven autos and individual human driven trucks, motorcycles, drunks and other impaired drivers (I’ve seen folks read a book while driving 60 MPH). Add to this the effects of rain, snow, fog and other weather factors. Not to mention rock-slides, avalanche, washed out bridges and so forth. And just because a hi-way is limited access, there is really nothing that stops a driver from accessing the hi-way in the “wrong” direction (which is common enough in China to bring into question which is the "right way), backing up because of a missed exit, pulling over to look at a map, or get a short nap, or make love in the back seat (I’ve seen it happen), etc., etc.
Rails has the advantage of being a controlled, dedicated roadway. With greater automation, rail will become increasingly safe, disallowing a driver from taking certain curves too fast, advanced notification of blockage on the tracks, fewer intersections with road traffic, etc.
We are a long way from displacing rail - a very long way. In fact, I believe the US will eventually catch up with the rest of the world and implement high-speed passenger rail because it makes a lot more sense than short-hop air transportation. A few months ago I traveled between Guilin and Guangzhou via high speed rail. About 550 mile in about 3 hours with top speed just under 200 MPH. The ride is smooth and comfortable, acceleration and deceleration controlled such that you are never uncomfortable with a very noticeable change in speed or direction.
Exactly what this implies for GBX, I’m not sure. They are clearly in the freight car business. But my guess is rail traffic will increase even in the face of reduced truck traffic inefficiencies.
Brittlerock,
That is interesting. I didn’t realize that trains were a hybrid. It will not be long before every train will be all electric.
http://gas2.org/2009/10/08/all-electric-freight-train-makes-…
Andy