The company also issued downside Q4 guidance seeing EPS of $1.30-$1.50 vs. the $1.89 consensus and revenue of $1.0 bln compared to the $1.1 bln expectation.
Click here to access GBX's earnings press release.
A mix of company-specific, macroeconomic, and geopolitical headwinds are plaguing the company's financial results.
To rewind, GBX was previously involved in a joint venture with Watco regarding its railcar repair operations. Since that partnership didn't deliver the expected results, GBX dissolved the joint venture in August 2018 and reclaimed control of twelve repair shops.
Following the transition, GBX identified unprofitable locations and focused on improving the volume and mix of work in order to boost results. If those actions didn't result in profitability, GBX then explored the potential sale of the location before reaching a final determination to shut down operations.
Last quarter, the company closed two repair shops, but in today's earnings press release, its CEO commented that the realignment of its repair network is still ongoing. The loss of revenue attributed to the closure of shops, combined with the expenses involved in this process, is providing a headwind.
Additionally, delays in the Brazilian rail concession renewal process are impacting the company. GBX has a 24.5% ownership interest in Amsted-Maxion in Brazil, which is a manufacturer of castings and components for railcars.
The Brazilian government is trying to reduce the country's reliance on road transportation for moving cargo, and thus has been providing concessions to railway companies in order to help finance expansion projects -- including the purchase of new railcars.
These concessions have been delayed, resulting in a loss this quarter for its Brazilian operations.
Last, GBX stated that pricing and manufacturing performance in Europe are progressing slower than expected while describing the global freight market as "choppy."
On a positive note, GBX still believes the U.S. economy is healthy with inflation remaining low and with the Federal Reserve signaling that it plans to keep a lid on interest rates.
Furthermore, the company anticipates that the current headwinds afflicting its repair network will become a tailwind later this year.
Key Takeaways: GBX is taking hits on multiple sides, some of which are in its control and some of which are not. The company has struggled to turn its performance around in its repair segment and investors may be losing confidence that GBX will make meaningful improvement soon.
The global macro environment has also become choppier, although the North American market (~70% of deliveries) remains healthy.