Railroad freight car and equipment manufacturer Greenbrier Companies (NYSE: GBX) stock took a sharp nose dive in March 2022 ahead of strong fiscal Q2 2022 earnings report. The Company is successfully navigating supply chain disruptions and inflationary pressures on commodities resulting in high raw materials costs and rising logistics expenses. The Russian conflict in Ukraine is expected to caused inflated commodities prices with grains, crude oil, and fertilizers to have far-reaching consequences. They are also among the top suppliers of iron ore and finished steel to Europe. However, robust demand, strong liquidity, and evolving leasing operations is offsetting headwinds as the Greenbrier continues to gain market share. It’s worth noting that U.S. freight rail roads with diesel and electric power generation is 3X to 4X more fuel-efficient than trucks. In fact, a single ton of freight can be moved almost 500 miles per gallon of fuel at a 75% reduction in greenhouse gas emissions. It also frees up congestion and wear and tear on highways. Greenbrier is a second half of the year story as its pricing actions in Q1 come to fruition. Prudent investors seeking exposure in a leader in rail car industry at a bargain price can watch for opportunistic pullbacks to scale into position.
Q2 Fiscal 2022 Earnings Release
On April 6, 2022, Greenbrier released its fiscal second-quarter 2022 results for the quarter ending February 2022. The Company reported an earnings-per-share (EPS) profit of $0.38 excluding non-recurring items versus consensus analyst estimates for $0.19, a $0.19 beat. Revenues spiked 131% year-over-year (YoY) to $682.8 million beating consensus analyst estimates for $575.76 million. New railcar orders were 8,500 units worth $930 million. Fleet lease utilization was 98% for the quarter. The Company delivered 4,800 unites resulting in a 1.8 book-to-bill ratio. The diversified new railcar backlog was 32,100 units worth $3.6 million as of Feb. 18, 2022.The Company expects deliveries around 17,500 units to 19,000 units for fiscal full year 2022. Greenbrier CEO Lorie Tekorius commented,
Conference Call Takeaways
CEO Tekorius took on the role of CEO on March 1, 2022. Former CEO Bill Furman was transitioned to the role of executive chairman. Furman set the tone, “The current war in Europe has created direct pressure on the availability and cost of commodities, ranging from minerals to food to fertilizer to crude oil, as well as coal and natural gas. Railroads and railway suppliers will help meet the challenge of keeping civilian life and economies functioning during the crisis. The commodity markets are traditionally leading indicators for expansion in the rail freight. Most commodities shipped by rail are experiencing upward pricing pressure from demand constraints due to either sanctions on Russia or reduced production from Russia and in the Ukraine. We expect rising global commodity prices and shifting trade patterns to elevate rail car demand in North America and Brazil and elsewhere in the world.”
CEO Tekorius noted the Company is still experiencing effects from the pandemic including absenteeism of around 12% of its work force due to the virus contraction. The supply chain and labor pressures directly caused manufacturing margins to come in below expectations. However, they have been able to avoid any line shutdowns material availability. This is all transitory as the operating momentum continues to improve moving forward with higher pricing and optimized overhead absorption on the increased production. The Russian and Ukraine conflict is directly impacting materials costs and they are among the largest suppliers of iron ore, and finished steel. The higher materials costs stemming from the conflict is also impacting its service business, but the Company is starting to see improving financials from the plans implemented in fiscal Q1 2022 coming to fruition and should become more obvious in the second half of the year. She concluded, “As we’ve said before, the market recovery won’t follow a straight line, and there will be challenges along the way. We are managing our business to get ahead of these challenges wherever we can, to continue to provide solutions to our customers and ultimately deliver value to our shareholders.”
GBX Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provide a precise view of the price action playing field for GBX stock. The weekly rifle chart peaked on a double top near the $53.58 Fibonacci (fib) level before sharply selling off towards $42.43 before attempting to rally. The weekly market structure low (MSL) buy triggered on earlier breakout through $41.27 and the weekly market structure high (MSH) sell triggered on the breakdown below $50.38. The weekly 5-period moving average is starting to curl down at $50.19 on a flat 15-period MA at $45.22, 50-period MA at $44.37 and 200-period MA support at $37.46. Shares fell so fast causing the weekly stochastic to immediately peak and cross down towards the 80-band test. The daily rifle chart formed a downtrend with a falling 5-period MA at $45.75 crossing below the 50-period MA at $46.34 as shares test the 200-period MA at $43.93. The daily lower Bollinger Bands (BBs) sit at $42.61. The daily stochastic mini inverse pup made a full oscillation as it plunged under the 20-band. Shares sold off into earnings. Prudent investors can watch for opportunistic pullback levels at the $43.94 fib, $42.32, $41.07 fib, $39.81 fib, $38.19 fib, $35.32 fib, and the $32.08 fib level. Upside trajectories range from the $51.67 fib level up towards the $60.47 fib level.
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