Executive Summary / Key Takeaways

• Integrated Model Drives Record Performance: Greenbrier's integrated business model, combining manufacturing, leasing, and services, delivered record diluted EPS and core EBITDA in fiscal 2025, achieving a nearly 19% aggregate gross margin despite fewer railcar deliveries. This demonstrates enhanced operational efficiency and strategic resilience.
• Operational Excellence and Cost Discipline: Strategic initiatives like the completed Mexico in-sourcing expansion and European footprint rationalization are yielding significant cost savings and margin expansion, positioning the company for sustained profitability even in modest demand environments.
• Leasing Segment Provides Stability and Growth: The Leasing Fleet Management segment is a critical driver of predictable revenue and cash flow, with a growing fleet, high utilization rates (98.2% in FY2025), and strong lease renewals at substantially higher rates, on track to double recurring revenues by fiscal 2028.
• Strategic Outlook and Market Tailwinds: While fiscal 2026 anticipates lower railcar deliveries, management expects a stronger second half driven by robust inquiries, an aging North American fleet, and potential tailwinds from clearer U.S. tax and trade policies, alongside infrastructure investments in Europe and Brazil.
• Strong Financial Position and Shareholder Returns: Greenbrier maintains robust liquidity, a disciplined capital allocation framework, and a commitment to shareholder returns through consistent dividends and share repurchases, supported by a debt profile increasingly featuring nonrecourse borrowings for lease fleet growth.

The Integrated Powerhouse: Greenbrier's Enduring Thesis

The Greenbrier Companies, Inc. (NYSE:GBX), founded in 1974, has evolved into a global leader in freight transportation equipment and services. Its core investment thesis is deeply rooted in an integrated business model that seamlessly combines freight car manufacturing, wheel services, railcar maintenance, component parts, leasing, and fleet management. This comprehensive approach is designed to offer end-to-end solutions, foster cross-selling opportunities, and generate synergistic efficiencies that enhance margins, creating a competitive advantage that is difficult to replicate.

Greenbrier's strategic journey has been marked by continuous adaptation and optimization. The company has a significant global footprint, manufacturing freight railcars in North America, Europe, and Brazil. A pivotal organizational realignment, effective September 1, 2024, consolidated its former Maintenance Services and Manufacturing segments into a unified "Manufacturing" segment, while "Leasing Management Services" was rebranded "Leasing Fleet Management." This restructuring streamlines operations and resource allocation, reflecting a more holistic approach to its diverse offerings.

The company's technological differentiation is embedded in its product design and operational processes. Greenbrier manufactures a wide array of freight railcars, including specialized designs like its Maxi-Stack I and Maxi-Stack IV double-stack intermodal railcars, which offer significant operating and capital savings over other intermodal types. Its "Sustainable Conversions™" program is a key innovation, repurposing existing railcars into new equipment for different services, such as rebodying covered hoppers or performing tank car retrofits. This not only provides an efficient and cost-saving option for customers to diversify and optimize their fleets but also leverages Greenbrier's engineering expertise to extend asset lifecycles. While specific quantifiable metrics for the cost savings or efficiency gains of these conversions are not publicly detailed, the strategic intent is clear: to offer value-added solutions that enhance fleet flexibility and regulatory compliance. Research and development investments, totaling $5.5 million in fiscal 2025, underscore a commitment to improving existing technology and developing new products that maintain a competitive edge.

Competitive Landscape and Strategic Positioning

Greenbrier operates in a highly competitive global industry. In North America, it stands as one of the two largest railcar manufacturers, while in Europe, it is considered a top-tier manufacturer. Its 60% ownership in Greenbrier-Maxion positions it as a leading railcar manufacturer in South America. Competition across all segments—manufacturing, wheel services, maintenance, and leasing—is fierce, primarily based on quality, price, delivery timeliness, innovative product design, reputation, and customer service.

Compared to direct competitors like Trinity Industries (TRN), Greenbrier's diversified global presence across North America, Europe, and South America provides a broader market reach. While TRN may hold an edge in scale for certain large-volume production runs, Greenbrier's integrated model, particularly its extensive repair and parts network, offers superior operational efficiency in maintenance services. Greenbrier's ability to offer comprehensive fleet management and leasing services, integrated with its manufacturing, differentiates it by providing end-to-end solutions that enhance customer retention.

Against GATX Corporation (GATX), a specialist in railcar leasing, Greenbrier's manufacturing capabilities allow for customized railcar solutions, a potential weakness for GATX's leasing-centric model. Greenbrier's strategic adaptability through multi-segment operations contrasts with GATX's more focused approach. In the technology and components space, Wabtec Corporation (WAB) emphasizes advanced digital solutions and braking systems. While Greenbrier's R&D focuses on product and process innovation, WAB's emphasis on digital integration could provide an advantage in emerging tech-driven rail solutions. However, Greenbrier's operational execution for physical rail assets and its extensive network for refurbishment provide a strong competitive moat.

The company's competitive advantage is further bolstered by its strong servicing capability and its ability to syndicate railcars with attached leases, integrated with its manufacturing and maintenance shops. This unique combination of railcar specialization and expertise in lease structures is a significant differentiator. Greenbrier also faces indirect competition from alternative transportation modes like trucking, which could shift customer preferences. However, high capital requirements, stringent regulatory approvals, and established relationships with railroads act as significant barriers to entry, protecting Greenbrier's market position.

Financial Performance: A Story of Resilience and Efficiency

Greenbrier's fiscal year 2025 marked a period of exceptional financial performance, demonstrating the effectiveness of its strategic transformation. The company achieved record full-year diluted earnings per share of $6.35 and record core EBITDA of $492.7 million. This was accomplished despite a decrease in total revenue to $3.24 billion in 2025 from $3.54 billion in 2024, primarily due to an 8.5% decrease in railcar deliveries to 20,400 units.

The aggregate gross margin expanded significantly to nearly 19% for fiscal 2025, a notable improvement from 15.8% in 2024. This marks the eighth consecutive quarter of meeting or exceeding the company's mid-teens gross margin target. This margin expansion was primarily driven by operating efficiencies within the Manufacturing segment, which saw its margin as a percentage of revenue increase by 2.40% to 14.5% in 2025. Manufacturing Earnings from operations increased by 6.1% to $327.5 million.

The Leasing Fleet Management segment also contributed significantly, with revenue growing 7.2% to $249 million in 2025, driven by a $27.3 million increase in rents due to fleet growth and improved lease rates. The segment's earnings from operations surged 15.5% to $160.6 million, further supported by a $3.2 million increase in net gain on disposition of equipment. The owned lease fleet expanded by 9.7% to approximately 17,000 railcars, maintaining a high utilization rate of 98.2% with an average remaining lease term of 4 years and an average age of 7 years. Recurring revenue reached nearly $170 million over the last four quarters, representing almost 50% growth from its starting point two years prior.

Operating income for the company increased by 11% to $360.1 million in 2025. The return on invested capital (ROIC) was nearly 11% for the 12 months ending August 31, 2025, falling within the company's 2026 target range of 10% to 14%. This strong performance, achieved on 2,000 fewer deliveries than in fiscal 2024, underscores the effectiveness of Greenbrier's operational improvements and strategic focus on profitability over volume.

Strategic Initiatives and Operational Excellence

Greenbrier's strong financial results are a direct outcome of several strategic initiatives aimed at enhancing operational efficiency and cost control. The in-sourcing capacity expansion in Mexico is now effectively complete, with its full value expected to be realized as production scales through fiscal 2026 and beyond. This initiative aims to mitigate supply chain risks and reduce costs for critical components.

In Europe, the company has undertaken significant footprint rationalization, including the closure of two additional facilities in Poland and Türkiye, following a previous closure in Romania. These actions are projected to generate annualized savings of $20 million without impacting overall European production capacity. Instead, production is being consolidated into fewer, more modernized facilities, positioning Greenbrier to sustain higher margins in varying demand environments.

A key operational differentiator is programmatic railcar restoration work, which is not included in the traditional backlog but significantly bolsters manufacturing margins. This involves repurposing existing railcars and performing statutory requalifications, which are required every ten years for large fleet owners. This work, performed on approximately 2,000 to 3,000 units annually, utilizes existing capacity, absorbs overhead, and generates high margins.

Outlook and Guidance for Fiscal 2026

Greenbrier's fiscal 2026 guidance reflects its improved operational foundation and strategic resilience. The company anticipates new railcar deliveries of 17,500 to 20,500 units, including approximately 1,500 units from its Brazilian operations. Revenue is projected to be between $2.7 billion and $3.2 billion.

Despite the expected decrease in deliveries compared to fiscal 2025, Greenbrier forecasts an aggregate gross margin between 16% and 16.5% and an operating margin between 9% and 9.5%. This sustained profitability, even with lower volumes, is attributed to ongoing operating efficiencies, cost reduction initiatives, and a favorable product mix. Earnings per share are guided to be between $3.75 and $4.75. The company also expects a reduction in Selling, General, and Administrative (SG&A) expenses of approximately $30 million compared to fiscal 2025.

Management believes the market is currently at a low point in its cycle, with inquiries becoming substantially more robust. A stronger second half of fiscal 2026 is anticipated, driven by an aging North American railcar fleet (exceeding 20 years on average) and increased scrapping levels, leading to significant replacement demand. Potential tailwinds include a resurgence in oil demand, upstream/downstream chemicals, and clearer U.S. tax and trade policies, such as the "One Big Beautiful Bill Act" (OBBBA) which includes provisions for 100% bonus depreciation. Brazil's market is also expected to benefit from increased demand and a 30% import tax on non-Brazilian railcars.

Capital expenditures for fiscal 2026 are projected at $80 million for manufacturing and a gross investment of $240 million in Leasing Fleet Management. With expected proceeds of $115 million from equipment sales, net capital investment is estimated at $205 million. Greenbrier remains committed to its strategic goal of investing up to $300 million annually to grow its lease fleet.

Risks and Challenges

Greenbrier operates amidst ongoing macroeconomic uncertainty, including inflationary pressures, global trade tensions, and interest rate volatility. These factors could lead to higher raw material and labor costs, supply chain disruptions, or reduced demand for railcars and leasing services. While Greenbrier's products are USMCA compliant and not direct targets of tariffs, tariffs on inputs like steel can impact costs, and the broader uncertainty can affect customer investment decisions.

The company relies on a limited number of suppliers for certain specialty components, and disruptions could impact production. Geopolitical events, such as the war in Ukraine, have led to higher energy costs and supply chain disruptions, particularly affecting European operations, and not all increased costs are subject to pass-through clauses. Environmental liabilities, notably the Portland Harbor Superfund Site, represent a long-term contingent risk, with an estimated cleanup cost of $1.7 billion (undiscounted) over many years, though Greenbrier disputes material contribution. Cybersecurity threats also pose a continuous risk to operations and data integrity.

Conclusion

Greenbrier's fiscal 2025 performance underscores a compelling investment thesis built on resilience, operational excellence, and a strategically integrated business model. The company's ability to deliver record earnings and robust margins in a modest demand environment, driven by efficiency gains from Mexico in-sourcing and European rationalization, demonstrates a fundamental shift towards "higher lows" in its performance baseline. The Leasing Fleet Management segment, with its strong recurring revenues and disciplined growth, provides a stable and predictable earnings foundation.

Looking ahead, Greenbrier is well-positioned to capitalize on an anticipated market recovery in the latter half of fiscal 2026, fueled by an aging North American fleet and supportive policy changes. Its technological capabilities, particularly in sustainable conversions and specialized railcar manufacturing, coupled with a diversified global footprint, provide a strong competitive moat against rivals. While macroeconomic headwinds and supply chain risks persist, Greenbrier's experienced management team, strong liquidity, and commitment to shareholder returns through dividends and buybacks reinforce its long-term value proposition for discerning investors. The company's strategic focus on efficiency and integrated solutions should enable it to continue generating durable returns through market cycles.