The Greenbrier Companies' Q1 2026 Earnings Call: Shifting Narratives on EPS Guidance, Production Timelines, and Margin Expectations

Date of Call: November 30, 2025

Financials Results

• Revenue: $706 million, essentially in line with expectations
• EPS: $1.14 per diluted share
• Gross Margin: 15%, reflects lower production rates and deliveries in Q4, partially offset by strong leasing margins
• Operating Margin: 9% of revenue

Guidance:

• New railcar deliveries of 17,500 to 20,500 units, including approximately 1,500 in Brazil.
• Revenue between $2.7 billion to $3.2 billion.
• Aggregate gross margin of 16% to 16.5%.
• Operating margin between 9% and 9.5%.
• Earnings per share of $3.75 to $4.75.
• Capital expenditures in manufacturing projected at ~$80 million.
• Gross investment in leasing & fleet management ~$205 million.
• Proceeds from equipment sales expected ~$165 million, may be higher.

Business Commentary:

• Strong First Quarter Performance and Disciplined Execution:
• Greenbrier delivered a good first quarter, with revenue of $706 million, and an aggregate gross margin of 15%.

• This performance was attributed to disciplined execution, the resilience of their business model, and the flexibility of their operating model.

• Order Activity and Manufacturing Adjustments:

• Greenbrier received global orders for approximately 3,700 railcars valued at roughly $550 million, with a backlog of approximately 16,300 units valued at about $2.2 billion.

• The company is proactively aligning production levels with current demand conditions, expecting modest adjustments in the second quarter, and is focused on order quality and backlog mix.

• Liquidity and Capital Allocation:

• The company's liquidity was the highest in the last 20 quarters, with over $895 million, consisting of more than $300 million in cash and $535 million in borrowing capacity.

• Greenbrier continues to prioritze capital allocation by deploying capital where returns are strongest, maintaining balance sheet strength, and returning capital to shareholders through dividends and stock buybacks.

• Leasing Business Performance and Strategy:

• The lease fleet performed at a high level with utilization nearly 98%, strong retention, and improving economics on renewals.

• Greenbrier is actively managing its leasing portfolio and is opportunistic in the secondary market, which supports consistent execution and positions the leasing business for future growth.

• Guidance and Market Outlook:

• Greenbrier reiterated its fiscal 2026 guidance, with new railcar deliveries projected between 17,500 to 20,500 units, and revenue expected to be between $2.7 billion to $3.2 billion.
• The outlook reflects the improved foundation of the business, disciplined execution, and the flexibility built into their operating model, despite varied near-term market conditions.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'Greenbrier delivered good first quarter performance, exhibiting our disciplined execution and the resilience of our business.' Management reiterated fiscal 2026 guidance, expressed confidence in navigating conditions, and highlighted strong liquidity, order activity picking up, and a high-level leasing fleet.

Q&A:

• Question from Andrzej Tomczyk (Goldman Sachs): Could you talk about visibility into second half year-over-year delivery growth and what's driving that between Europe and North America?
  Response: Good visibility into summer months (June-August), expecting year-over-year growth as production ramps up.

• Question from Andrzej Tomczyk (Goldman Sachs): What are the potential medium- to longer-term impacts related to Venezuela on your business?
  Response: No direct or indirect impacts expected from Venezuela; any oil-related activity is typically handled via pipeline, not rail.

• Question from Andrzej Tomczyk (Goldman Sachs): Any changes in customer ordering behavior into December/January and sequential delivery/margin expectations?
  Response: Order activity continues to tick up; margins expected to be stronger in back half of year versus first half.

• Question from Andrzej Tomczyk (Goldman Sachs): How did lease rates trend sequentially and how much of the lease book is up for renewal this year?
  Response: Specialty car rates stable, commoditized rates pressured; double-digit year-over-year renewal rate increases; about 1,500-1,800 cars up for renewal, ~35% renewed so far.

• Question from Andrzej Tomczyk (Goldman Sachs): What should be expected for full-year gains on asset sales relative to the large Q1 gain?
  Response: Opportunistic activity in secondary market continues; timing of gains unpredictable, but guidance already assumes some beneficial transactions.

• Question from Andrzej Tomczyk (Goldman Sachs): What is the expected trajectory for lease fleet growth this year?
  Response: Single-digit to maybe slightly higher growth expected, committed to long-term leasing business growth.

• Question from Andrzej Tomczyk (Goldman Sachs): Are tariffs and potential Class 1 rail consolidation ultimately positive or negative?
  Response: Tariffs neutral financially but create customer uncertainty; rail mergers are a positive if they make the industry stronger and shift more freight to rail.

• Question from Bascome Majors (Susquehanna): How engaged is Greenbrier in the USMCA review and the exemptions for railcars?
  Response: Strongly supportive of USMCA; free flow of railcars critical; engaged in submitting comments; hope for continuous improvement rather than overhaul.

• Question from Bascome Majors (Susquehanna): Where do you have visibility to reach the midpoint of production guidance and what drives the ramp in second half?
  Response: White space is getting filled; ramp in back half driven by order conversions and barring unforeseen geopolitical events; headcount reductions are temporary.

• Question from Bascome Majors (Susquehanna): Is manufacturing gross margin largely a function of volume, or are there mix/pricing issues?
  Response: Margin improvement from higher volume is not linear; influenced by mix and production absorption of fixed costs.

• Question from Ken Hoexter (Bank of America): Did the Q1 gain on sale impact the EPS guidance, and were these gains expected?
  Response: Gain had ~$0.30 EPS impact; guidance already assumed some beneficial transactions; timing unpredictable, but market remains strong.

• Question from Ken Hoexter (Bank of America): What drives the higher ASP in recent orders, and do they have outsized margins?
  Response: Higher ASP from specialty cars; do not disclose margin details, but it is a growing market.

• Question from Ken Hoexter (Bank of America): Why was SG&A higher than expected?
  Response: SG&A up slightly due to currency translation adjustments; still on track for $30 million year-over-year reduction.

• Question from Ken Hoexter (Bank of America): How should we think about below-line items like minority interest and earnings from unconsolidated affiliates?
  Response: Earnings from unconsolidated affiliates (primarily Brazil) expected modestly positive; minority interest (partners' share) fluctuates; overall tracking similar to prior year.

Contradiction Point 1

EPS Guidance and Impact of Opportunistic Equipment Sales

This is a substantial contradiction regarding financial forecasts. The company's stance on how large, non-recurring gains from equipment sales affect its earnings guidance has shifted. Previously, such gains were acknowledged but downplayed as not impacting guidance. In the latest quarter, despite calling the Q1 gain "opportunistic," the company explicitly lowered its full-year EPS guidance range, indicating the gain's material impact was either not fully anticipated or communicated earlier, directly affecting investor expectations.

How do full-year equipment sale gains compare to the Q1 gain? - Andrzej Tomczyk (Goldman Sachs)

20260109-2026 Q1: The Q1 gain was opportunistic... Future gains are not explicitly guided but depend on market opportunities. - Brian Comstock, Lorie Leeson, Justin Roberts

How did Q1 equipment sale gains affect EPS guidance? Were these gains factored into the original EPS outlook? - Ken Hoexter (Bank of America)

20260109-2026 Q1: Brian Comstock: The gain had a ~$0.30 impact on EPS. Justin Roberts: Clarified EPS guidance is $3.75–$4.75. - Brian Comstock, Justin Roberts, Lorie Leeson

Contradiction Point 2

Production Ramp-Up Timeline and Volume Outlook

This is a substantial contradiction concerning production strategy and market outlook. The narrative around the key driver for the production ramp-up has changed. In Q4 2025, the company projected a strong second half based on a market at the "low point of the cycle" and a "resurgence in demand." In Q1 2026, the guidance shifted to a more cautious stance, emphasizing a gradual ramp from a prior summer's "ramp-down" and visibility only for the summer months, with no mention of the previously cited strong cyclical recovery. This suggests a potential delay or weakening in the expected demand rebound.

What is the visibility on manufacturing delivery growth for the second half of the year and its drivers in Europe and North America? - Andrzej Tomczyk (Goldman Sachs)

20260109-2026 Q1: Good visibility is expected, particularly for the summer months (June–August). Opportunities for year-over-year growth are anticipated as production ramps up from the prior summer's ramp-down. - Justin Roberts(Vice President of Financial Operations, the Americas)

For the 2026 outlook (17,500-20,500 deliveries in 2026 compared to 21,500 in 2025), what is the market backdrop, expectations for Europe to offset lower delivery volumes, and can you comment on the industry’s 30-40% decline forecast for next year’s car production? - Ken Hoexter (BofA Securities)

2025Q4: The company believes the market is at the **low point of the cycle**, with inquiries becoming 'substantially more robust.' A production ramp-up is forecasted for the **back half of the year**. They see the market as **stronger than some predict**, particularly for tank cars, citing a resurgence in oil demand and replacement activity. - Brian Comstock (Executive Vice President & President of The Americas) & Lorie Leeson (President, CEO & Director)

Contradiction Point 3

Gross Margin Drivers and Expectations

This is a substantial contradiction regarding financial forecasts and company strategy. The explanation for expected gross margin improvement has shifted from being driven by a deliberate, strategic initiative to a more passive, volume-dependent factor. In Q4 2025, management highlighted a proactive "reimagine production processes" effort to take costs out. In Q1 2026, the explanation simplified to a linear relationship with volume and fixed cost absorption, omitting the previously emphasized strategic cost reduction program, which could indicate a change in the primary path to achieving margin targets.

Is manufacturing gross margin linear to volume, or are mix and pricing factors involved? - Bascome Majors (Susquehanna)

20260109-2026 Q1: Margin improvement with increased volume is **not strictly linear**; it involves mix, production efficiency, and fixed cost absorption. - Justin Roberts(Vice President of Financial Operations, the Americas)

Excluding European cost reductions, what are the main drivers of 2026 margin trends? Are they primarily production rates and absorption? - Bascome Majors (Susquehanna Financial Group)

2025Q4: The slower first-half production cadence provides an opportunity for **manufacturing teams to take a 'deep breath' and reimagine production processes**, taking hours and costs out of units... This includes a 'soup-to-nuts' look at production moves and cost reduction... - Justin Roberts (VP of Corporate Finance & Investor Relations and Treasurer), Lorie Leeson (President, CEO & Director), Brian Comstock (Executive Vice President & President of The Americas)

Contradiction Point 4

Order Visibility and Production Ramp Timing

This is a substantial contradiction involving changes in market strategy and outlook. The basis for confidence in the production ramp's timing has shifted. In Q3 2025, confidence was heavily reliant on future order conversion and pent-up demand later in the year. In Q1 2026, the tone changed to emphasize current "good visibility" and a planned ramp, downplaying the earlier key variable of uncertain order conversion. This shift suggests a change in the underlying demand narrative from speculative to more immediate.

What is the visibility for second-half manufacturing deliveries in terms of year-over-year growth and regional drivers between Europe and North America? - Andrzej Tomczyk (Goldman Sachs)

20260109-2026 Q1: Good visibility is expected, particularly for the summer months (June–August). Opportunities for year-over-year growth are anticipated as production ramps up from the prior summer's ramp-down. - Justin Roberts(Vice President of Financial Operations, the Americas)

How will interest, FX, unconsolidated affiliates, and noncontrolling interest affect Q4 EPS? When will production rates align with current order levels next year, and when would you reduce production if orders remain weak? - Bascome Majors (Susquehanna Financial Group, LLLP, Research Division)

2025Q3: Order inquiry activity is up, and pent-up demand is expected to be robust later in fiscal 2026 (H2 FY26) as customers seek clarity on U.S. trade policy and tariffs. The timing of order conversion remains the key variable. - Brian J. Comstock(Executive Vice President and President of the Americas)

Contradiction Point 5

Backlog and Order Confidence

This is a substantial contradiction regarding market strategy and company messaging. The stated foundation for order confidence has changed. In Q3 2025, confidence was explicitly tied to a large specific backlog number and broad customer discussions. In Q1 2026, confidence shifted to being based on current order activity and a strengthened pipeline, with no mention of the previously highlighted specific backlog metric. This change in emphasis could indicate a recalibration of expectations or a lack of sustained backlog strength.

Have you noticed shifts in customer ordering behavior in December and January? What are the sequential delivery expectations (Q1 to Q2) and annual margin trends? - Andrzej Tomczyk (Goldman Sachs)

20260109-2026 Q1: Order activity strengthened into Q1, with December being unusually high. This trend is expected to continue. - Brian Comstock(Executive Vice President and President of the Americas)

Can you outline the expected line items below operating income (interest, FX, unconsolidated affiliates, noncontrolling interest) to bridge to Q4 EPS? With current order challenges, when would you adjust production rates next year and when would you consider reducing production if orders don't improve? - Bascome Majors (Susquehanna Financial Group, LLLP, Research Division)

2025Q3: Confidence stems from broad-based customer demand discussions across North America and Europe... Strong backlog (19,000 units) provides visibility. - Lorie L. Tekorius(CEO)