Greenbrier FY 3Q15 Earnings Call Notes

posted in: Notes | 0

This isn’t a down market, it’s just a normalized one

“I would not describe this as a down market. I would say that 15,000 cars as reported by the industry is much more close to a normalized replacement demand market. So, I think that people are really overreacting to a little bit to some of the things that they see in the marketplace. It is complicated world, and energy and other things have affected these markets, but – and perhaps just really quickly mentioned a couple of those in a moment. So, the market is not really down in the sense that it might have been in the late – in 2009. It is changing. ”

Currencies do matter in trade

“Energy prices are not down. They are trending up from lows both in dollar denominations and in real terms and other currencies. Currencies do matter. Currencies are one of the major drivers for reduction in agricultural, the demand exports for coal and so on. That in turn has affected velocity. But oil prices are settled in U.S. dollars and U.S. dollars are stronger while other currencies are weaker.”

I don’t really get why our stock trades the way it does, we’re just going to do our best and pound out strong earnings/cash flow

“I don’t fully understand, our stock is on trade, it seems on backlog because we have got a strong backlog, we have got improving margins, it’s not seeming to trade on that, it seem to be very professional investors whose are trying to time the market here or predicting a peak. I personally don’t get it, because this would apply to everybody. But hey, life isn’t fair so we are not complaining, we are just going to do our very best to continue to pound out very strong earnings and cash flow. And at the end of the day, one of our Board’s most important things to do is invest that cash flow wisely. They are fully engaged in everything management is doing and we are enthusiastic about the future. We are not discouraged by current market circumstances, many, many opportunities are out there for us.”

Greece is a tragedy for Greece but not for Europe

“Greenbrier has a very strong footprint in Mexico and we are strengthening ourselves in Brazil and the Americas. Currencies are making exports much more attractive in those currencies, particularly in agriculture and manufactured products, where both countries have a significant GDP footprint. This is a developing tailwind for all of our international business and we do about 65% – manufacture about 65% of our revenue base right now in international jurisdictions. There are increased geopolitical stresses, not just in the Middle East, but in Europe, which create upward pressure in the value of fungible commodities. While Greece is a tragedy for the Greece, it is not for Europe.”

Stronger dollar leads to lower exports, allows railroads to run fewer cars at higher speeds

“I think the wildcard here really is how geopolitical forces, especially the dollar has caused and contributed to more improved railroad velocity, which allows them to run fewer cars with the same number of – fewer cars that produce the same amount of product. And I think that as it sorts out, it will reach a normalized level. And I really do see a lot of this going on. Coal exports are down sequentially like 25%, that’s a big number in these gross numbers and it helps to improve velocity. We don’t think the energy game is over at all. It’s in a pause like ethanol was a few years ago. Everybody loves to predict what’s going to happen, we can’t predict it, but we see the underlying forces. And the underlying forces are positive for energy independence in North America.”