President, Chief Executive Officer & Director, GREENBRIER COS INC (THE)
Greenbrier (GBX) CEO on How A.I. Can Increase Efficiency
Greenbrier (GBX) designs, manufactures, and markets freight car equipment, Lorie Tekorius, CEO of The Greenbrier Companies ...
About Lorie Tekorius
Lorie Tekorius, President and CEO of The Greenbrier Companies, has been discussing the company's financial performance and industry conditions in several media appearances and earnings calls. In September 2024, she noted that the company had recently reported its highest earnings per share in over four and a half years, with consolidated gross margins in the mid-teens. She attributed the company's share performance to the leadership team's focus on its footprint, facility investments, and improving manufacturing and aggregate gross margins. Tekorius also stated that the company is working toward goals of doubling recurring revenue and increasing return on invested capital. Tekorius has also commented on trade and border issues affecting the rail industry. She described unannounced closures of rail crossings at the U.S.-Mexico border as a critical economic issue, stating that Mexico is the U.S.'s number one trade partner and that the closures disrupt commerce. She said she hopes policymakers can find a way to address the migration issue while maintaining cross-border trade. In other remarks, Tekorius noted that the rail industry is seeing a focus on infrastructure investment from both sides of the aisle, and that companies are shifting manufacturing to northern Mexico as part of a near-shoring trend following COVID-19 supply chain issues. She also discussed the company's involvement in Rail Pulse, an initiative to aggregate freight network information, and described technology and AI as evolving areas for the industry.
Transcript (17 segments)
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Oliver0:00
All right, let's talk some transportation and industrial logistics. The CEO of Greenbrier joins us. Lorie Tekorius is down at the New York Stock Exchange after ringing the bell this morning. Lorie, thanks for being here on the Schwab Network.
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Lorie Tekorius0:15
Thanks for having me, Oliver. It's great to see you.
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Oliver0:18
You guys are celebrating a pretty big anniversary. Kind of give us the quick rundown of the big changes in rails over the last 40 years. Okay, 60 seconds, go.
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Lorie Tekorius0:27
Oh my gosh. So yes, celebrating 30 years of being listed on the New York Stock Exchange, so that's very exciting. And then I want to think about everything that we've done in the organization over the last 40 years that we've been around. It's fantastic. We are pioneers in intermodal rail cars, where you have double-stack rail cars, our containers. We've got MultiMax Plus where we move cars and heavy-duty trucks. Just so much going on. And we've expanded; we're in Mexico, we're in Poland, we're in Romania, we're in Brazil. So it's just been an amazing ride. 178,000 double-stack container cars today, much smaller number at the debut, of course.
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Oliver1:04
When you look at the overall industry right now, what moves the needle on a quarter-to-quarter basis? Just trying to get a hold of the global economy or logistics changes you can make in the operation to squeeze out more?
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Lorie Tekorius1:18
What's really amazing is what's going on with consumers and consumer demand because so much of that is moved via rail. When you think about everything that we go to the store to buy, whether you're going to a HomeGoods place or the grocery store, most of those products have spent some form of their life in a rail car either as their base ingredients or as finished products to get to where we can all buy it. So from my perspective, being with Greenbrier for 29 years, that's what's been awesome. You get to see so many parts of our economy by what's moving on the rails. And where we see particular demand, what's most interesting recently is it's been super broad based. So we're seeing demand across all of the different commodities that we carry, and that's really keeping all of us moving. Lots of orders through our system, one of our record backlogs is keeping our 14,000 employees working and delivering rail cars.
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Oliver2:24
Do you have to think much about whether or not the president is going to issue tariffs and whether or not that will change any of the volumes you get from certain areas? Is that something that you're thinking about at all?
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Lorie Tekorius2:38
Oh, I think like many other CEOs, you're thinking about everything all the time. But yes, we have production down in Mexico, we are moving things back and forth. North America is amazing as a trading block because we've got an integrated railroad system, right? So we have to be able to move that stuff back and forth across the various borders to the north or to the south. So as you think about tariffs, as you think about all those other things, we have to be flexible, we have to be ready to respond with whatever might come up.
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Oliver3:10
When you look at the outlook, what do you see in terms of activity? Are you seeing the best bang for your buck internationally, or is there strength in the economy here that is underappreciated?
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Lorie Tekorius3:24
I think that there is a lot of strength here in the North American market that is underappreciated. One of the things that again people don't realize is how much is moved by rail, how environmentally friendly movement by rail is. It's a great way to move bulk products across the country. Also, over in Europe, there's a big focus on continuing to move product off of highways and onto the railroads, so we're seeing strong demand there. And same in Brazil. What I feel very fortunate about is all the markets in which we participate: we've got great backlog that gives us good visibility and allows us to think about how we can continue to extract value out of our operating system. We're growing our leasing portfolio here in the North American market, so that's something that takes a little bit more of the volatility out of manufacturing, which can be cyclical at times. By growing that lease fleet, we get those repeatable revenues, strong cash flow. So that's what we're really focused on as well here in North America.
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Oliver4:28
Your stock is up about 8% for the year. It was up more before getting dinged a little bit on earnings a couple weeks ago. A question on that, Lorie: the trailing numbers showed revenue contraction. The outlook looks like you're swinging back towards some growth within the next two quarters. Where does that inflection come from?
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Lorie Tekorius4:47
You know, one of the things that we all kind of reflect on is what we did yesterday and what could we have done better. While we didn't meet Street expectations on the revenue line, our margin performance and we had record EPS based on the last four and a half years. So I think that we could have done a better job of communicating to our shareholders how we're trying to generate shareholder value day in and day out. And again, this is where we're looking at with strong backlog, with broad-based demand: how can we continue to extract efficiency out of our process? How can we continue to grow on the leasing side? And how we're maintaining our cars in our network here.
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Oliver5:28
Where is there any potential for new tech like AI to work into the logistics side at all? I mean, is there any way to spice up the software that you're using to run these processes?
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Lorie Tekorius5:44
I like the fact that you use the word spice because sometimes I think people look at manufacturing or they look at freight rail and they think, oh my gosh, that's so boring and antiquated. There is a lot of spice in the rail industry. And I do think technology, AI, is something that will continue to evolve. We're participants in a thing that's called Rail Pulse, which is where we're trying to pull together information from across the freight network so that we can help our shippers who are moving the products to know better where their products are, how they're going to get to it. It's going to take time. So again, I think we just have to be flexible, we have to roll with it, figure out how we can best use technology to serve our employees and our customers.
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Oliver6:27
Okay, thanks for the introduction. Appreciate your time, Lorie. We will be in touch.
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Lorie Tekorius6:31
Thank you very much, Oliver. Have a great day.
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Oliver6:34
Thank you. Lorie Tekorius, the CEO of the Greenbrier Companies. All right, some train chat.