Stifel Cuts Greenbrier To Hold, Cites 'Slowing Industry Railcar Orders'

In a report published Tuesday, Stifel analyst Michael J. Baudendistel downgraded the rating on

from Buy to Hold, citing an expected decline in industry production levels after 2015. Greenbrier's share price has appreciated by 11 percent so far this year versus an over one percent increase in the S&P500. The company's shares appear fully valued at present. "We believe the prospect for declining industry production levels after 2015, leading to the possibility of multiple compression for the industry as a whole, could prevent the company's shares from continuing to outperform the market during the next 12 months," analyst Michael J Baudendistel mentioned. The industry production levels are expected to peak at 84,000 in 2015 and decline to 74,000 in 2016 and to 64,000 in 2017. "…The majority of the decline in 2016 and 2017 is driven by an unfavorable outlook for deliveries of tank cars (recent order strength driven by increased crude-by-rail volume) and covered hoppers (recent order strength driven by increased frac sand carloads) due to the fall in oil prices," Baudendistel added. Recent rail traffic volume and operating metrics are also expected to restrict the volume of future orders for the industry and the company. In the report Stifel noted, "We believe the largest risk to our downgrade is that the company's margin improvement initiatives in its Manufacturing and/or Repair/Service segments may deliver better results than we are modeling."