Why Greenbrier Shares Are Up Big Today

Railcar manufacturer Greenbrier (NYSE: GBX) used strong cost management to easily top expectations and raise profitability guidance for the year.

Investors are relieved, sending shares of Greenbrier up 20% as of 12:30 p.m. ET.

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Making the most of a tough environment

It is a tough operating environment for railroads, with volumes down due to economic uncertainty and the impact of tariffs. In times like this, you don't normally see railroad companies making big capital expenditures, and shares of supplier Greenbrier came into earnings down 20% for the year based on those low expectations.

Late Tuesday, the company delivered an earnings surprise. Greenbrier earned $1.86 per share in the quarter on revenue of $842.7 million, easily surpassing Wall Street's $0.98 per share on revenue of $795 million consensus estimate.

Revenue was only up 2.7% year over year, but the company was able to use operating efficiencies and gains from its leasing portfolio to boost the bottom line.

"In a dynamic trade and economic environment, our focus on efficiency, agility, and strategic investment is yielding positive results," CEO Lorie L. Tekorius said in a statement.

Is Greenbrier stock a buy?

The company sees more opportunities for improvement up ahead. Greenbrier raised its full-year guidance for gross margin and operating margin, predicting about $10 million in annual savings from its effort to rationalize its European network.

This is a cyclical business, and it could be tough for Greenbrier to really accelerate until railroads see demand grow. But Greenbrier if nothing else is making the case that investors had overreacted in sending the stock down big prior to earnings. For those interested in the 2.3% dividend yield and willing to be patient to ride out a recovery, there is still time to climb on board.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.