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Oregon transportation company exceeds expectations in third quarter

by Sirena Rubinoff
July 10, 2007


Greenbrier Cos., a supplier of railroad equipment based in Lake Oswego, Ore., reported an unexpected 21.9 percent rise in net earnings in the fiscal third quarter, largely due to the acquisitions of Rail Car America and Meridian Rail Services earlier in the year. The stock closed Tuesday at $33.15, up nearly 16 percent for the day.

The transportation company’s net earnings for the quarter ending May 31 rose to $13 million, or 81 cents per diluted share, from $10.7 million, or 67 cents per diluted share in the same period a year ago. Analysts far underestimated Greenbrier’s performance for the quarter, forecasting an average estimate of 39 cents per diluted share, according to Yahoo Finance.

“After the first two quarters [of poor performance], people were pretty pessimistic about the manufacturing side of operations, which accounts for a big portion of the total earnings,” said analyst JB Groh with D.A. Davidson & Company. “Also, the refurbishment and parts side of the business did better than anyone expected.”

Additionally, Senior Vice President and Treasurer Mark Rittenbaum said the company’s choice to permanently close TrentonWorks Ltd., its  Canadian railcar manufacturing facility, has “paid off.”  The decision was made in April to increase company efficiency and reduce “drag on operating systems,” he said.

Greenbrier said without the $3.1 million in costs associated with the closure of TrentonWorks, the company earned $16.1 million, or $1 per diluted share.

Revenue was  $386.6 million, rising 45.3 percent compared  with last year’s third quarter revenue of $266.1 million.  About $85 million of the increase is  from the acquisition of Rail Car America and Meridian Rail Services in October 2006. The remainder of the increase  was from  higher  demand for refurbishment and parts work. 

Most investors didn’t expect the company to post such large revenue and net income increases after paying for closing the Canadian railcar plant, said analyst Paul Bodnar with Longbow Research.

“They expected Canada to continue being a drag, but at the end of the day, [Greenbrier was] able to normalize [operations},” Bodnar said.
Additionally, Greenbrier paid off $100 million in debt over the course of the quarter.
The company expects to continue doing well as it  rounds out its   fiscal year.  Analysts expect the company  to earn 51 cents per diluted share for the current quarter.

After reporting special charges of $16.6 million, in addition to the nearly $3.1 million from the TrentonWorks closure, Greenbrier earned $8.8 million, or 55 cents per diluted share, during the first nine months of the fiscal year. That’s down from $27.3 million, or $1.71 per diluted share,  during  the same nine-month period last year. Sales rose 26.8 percent to $873.2 million from $688.7 million.