Greenbrier posts tiny, unexpected 3Q profit, slams GE

Posted Jul 7th 2009 10:30AM by Elizabeth Harrow
Filed under: Earnings Reports, Forecasts, General Electric (GE)

The Greenbrier Companies (NYSE: GBX) stepped into the earnings spotlight this morning, with the rail-car maker reporting a fiscal third-quarter loss of $50.5 million, or $3 per share. The company chalked up its widened quarterly loss to $55.7 million in goodwill write-downs, as well as waning demand. Excluding that write-down, earnings would have arrived at three cents per share. Revenue for the period tumbled 36% to $244 million. Analysts were looking for a loss of five cents per share on $269 million in revenue.

GBX also announced that 550 additional workers will be furloughed as a result of continuing weakness in the economy and an uncertain outlook for the future. Greenbrier is pointing the finger at General Electric Company (NYSE: GE) for that cloudy forecast, claiming that the conglomerate is in breach of contract. "This limited visibility is exacerbated by GE's unilateral actions and the uncertainties surrounding our multiyear contract with them," stated CEO William Furman.

Specifically, Greenbrier is currently saddled with a hefty backlog of 11,800 rail cars. GE is responsible for roughly 84% of those cars, having signed a $1.2-billion contract back in 2007. However, the blue chip has asked GBX to slow production on the cars to a pace that "does not allow for efficient operations of our manufacturing facility," according to Greenbrier.

For its part, GE is staying mum this morning. The company has previously said it is seeking to modify the terms of its contract with Greenbrier.

Considering the multiple fundamental challenges facing GBX, investors seem none too impressed today with the company's adjusted quarterly profit. The stock was down nearly 6% at its intraday low of $6.50, continuing a short-term slump beneath pressure at its 10-day and 20-day moving averages.

However, the equity could find a floor near the $6 level. This region has acted as support since April, and it also happens to be the site of GBX's 20-week moving average.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Tags: furlough, GBX, GE, General Electric, GeneralElectric, inthenews, rail car, RailCar, The Greenbrier Cos, TheGreenbrierCos, third-quarter earnings, Third-quarterEarnings