Why Greenbrier Companies Inc Stock Jumped 18% on Friday

Greenbrier stock is leaving the station, and heading for a brighter tomorrow. Image source: Getty Images.

What happened

Shares of rail-car manufacturer Greenbrier Companies (NYSE: GBX)closed out the week on a strong note, exploding as much as 17.9% higher after reporting fiscal Q1 2017 earnings, and closing the day up an even 16%.

So what

That's curious, because relatively speaking, Greenbrier actually did not do particularly well last quarter. The company's $0.79 in reported earnings was less than half what Greenbrier earned in the year-ago quarter, and fell $0.04 short of analysts'projected $0.83 in earnings.

Nonetheless, investors appear to be encouraged by the company reporting $552.3 million in sales -- also down year over year, but 13% better than what Wall Street had expected to see this quarter.

Now what

Adding to investors' optimism was management's guidance for the balance of this year. At last report, analysts following Greenbrier expected the company to post just a little over $2 billion in sales this year, and earn $3.37 per share off that revenue. But now, management says it's more likely it will book sales of anywhere from $2 billion to $2.4 billion -- and earn anywhere from $3.25 to $3.75 per share on them.

At the midpoint, therefore, Greenbrier is promising both revenue and earnings significantly better than Wall Street was expecting. Assuming the company hits these new targets, its shares are selling for the not-too-challenging valuation of just 13.3 times this year's earnings.

Long story short: Investors are pleased, as well they should be.

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Rich Smith has no position in any stocks mentioned. The Motley Fool recommends The Greenbrier Companies. The Motley Fool has a disclosure policy.