Greenbrier Companies (NYSE:GBX) held its third-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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Summary
Greenbrier Companies reported strong performance in its manufacturing segment driven by operating efficiency, cost discipline, and solid maintenance work.
The company aims to double its recurring revenue base by 2028, focusing on expanding its lease fleet and leveraging secondary market opportunities.
Greenbrier ended the quarter with 13,800 railcars valued at $2 billion in backlog, with strong demand for tank cars and covered hoppers.
The leasing and fleet management segment saw an expansion of the owned lease fleet to 20,600 railcars with a utilization rate of 99%.
For fiscal 2026, Greenbrier maintains its revenue guidance of $2.4 billion to $2.5 billion and narrows its EPS range to $3 to $3.15.
The company's balance sheet remains strong with approximately $887 million in liquidity, supporting ongoing investment and shareholder returns.
Recent regulatory changes, including potential tariffs on tank cars, are being monitored closely, but are not currently impacting demand.
Greenbrier's strategic initiatives include improving operational efficiency through insourcing investments and aligning production with demand.
Full Transcript
Lori
Our manufacturing segment, which includes maintenance, wheels and parts activity in North America, executed well in the third quarter. Operating efficiency, cost discipline, and solid program and maintenance work helped drive the overall performance in the current macro environment. Our lease origination capabilities provide key flexibility to manage new car production and support utilization across our manufacturing footprint. In addition, our insourcing investment is delivering broad-based sustained efficiency gains that will further improve earnings power as demand grows.
In leasing and fleet management, we saw significant expansion of our own lease fleet with continued high utilization. We remain focused on growing this platform and doubling our recurring revenue base by 2028 through both our own manufacturing operations and secondary market opportunities as they arise. The enterprise-wide improvements that have been made at Greenbrier are supported by a strong financial foundation. A healthy and well-capitalized balance sheet and ample liquidity provide flexibility to support operations, invest in the business, return capital to shareholders, and execute our strategy.
As we look ahead, our focus remains squarely on operational execution, commercial discipline, capital allocation, and ongoing enhancement of through-cycle performance. You can expect Greenbrier's solid results across the cycle to continue driving long-term shareholder value. Finally, I want to thank our employees for their focus, commitment, and execution. Each and every one of their efforts demonstrates the strength of Greenbrier's culture and the durability of the platform that we've built.
And with that, I'll turn the call over to Brian to discuss our operations in more detail.
Brian Comstock, Executive Vice President & President, The Americas
Thanks, Lori, and good afternoon everyone. Starting with commercial activity, we received orders for 2,200 railcars during the quarter valued at 340 million. Demand was led by tank cars and covered hoppers with additional activity in gondolas, open top hoppers, and heavy-duty flats. In addition to constructive rail loading trends, it's also worth noting the significant increases in trucking spot rates driven by driver shortages, elevated fuel costs, and carrier attrition.
While this alone doesn't signal a broad-based freight demand recovery, sustained higher truck rates would improve the relative competitiveness of rail and intermodal service. Turning to backlog, we ended the quarter with 13,800 railcars valued at 2 billion. Our commercial team remains highly engaged with customers across North America, Europe, and Brazil, and we are seeing solid activity across several car types. As Lori noted, our lease origination capabilities were a prominent feature of the quarter.
Lease originations represented 60% of total global orders, including 71% of North American awards and 53% of European awards. This highlights the value of our commercial model, flexible production capacity, and our ability to respond to customer needs. The leasing and fleet management segment delivered another strong quarter. We expanded the owned lease fleet to 20,600 railcars, and utilization remained exceptionally strong at 99%. Renewal rates were healthy, reflecting both the quality of our fleet and the depth of our customer relationships.
During the quarter, we continued to pursue disciplined fleet growth through secondary market acquisitions of approximately 4,400 railcars and remain active in evaluating additional opportunities. These are strategic investments that support lease fleet growth, recurring revenue, and long-term value creation. Moving to our manufacturing segment, production rates were aligned with current demand levels consistent with our proactive management of the business.
Headcount continues to be adjusted in line with our team's focus on maintaining operational efficiency as market conditions evolve. At these production levels, operating performance and margin progression improved, reflecting the benefits of our insourcing strategy and focus on cost competitiveness. Recent capital investments are yielding strong returns even at current production levels. Wheelset shipments exceeded expectations, the maintenance team sustained steady throughput, and we continue to see progress in cycle time execution.
We also are taking actions to sharpen the focus and efficiency of our maintenance service network. In Europe, demand remains muted, but we are making progress following recent footprint actions. With the facility consolidation complete, the team has focused on streamlining the production process, reducing inventory, and improving quality and production rates. We are also seeing encouraging traction in the European leasing market. In Brazil, Greenbrier Maxion delivered another quarter of strong operational performance driven by demand in agriculture and biodiesel sectors.
Financial performance exceeded expectations supported by disciplined cost control, operating efficiency, and improved pricing. Our capital markets team continued to support the integrated model through strong monetization activity, expanded investor relationships, and secondary market activities. These activities generate profitable through margin recognition and fee income, provide liquidity, support the lease fleet growth, and reinforce the benefits of Greenbrier's integrated platform.
In summary, we continue to align production with customer demand, execute with discipline across the platform, expand our leasing capabilities, and advance key initiatives that support margin performance. And with that, I'll turn the call over to Michael to review our financial results in a bit more detail.
Michael Donfris, Senior Vice President, Chief Financial Officer
Thanks, Brian, and good afternoon everyone. Total revenue for the quarter was 577 million. Leasing and fleet management revenue was 47 million, up 3% from Q2, primarily reflecting the addition of leased railcars. Manufacturing revenue was 529 million, down about 2% sequentially, primarily due to fewer new railcar deliveries, partially offset by higher maintenance program revenue. Aggregate gross margin was 14.1% within our long-term target range and improved from Q2.
This performance demonstrates the strength of our integrated business model and the impact of our continued cost discipline. Earnings from operations were 32 million, or about 6% of revenue. These results reflect solid execution at current production volumes and our continued focus on the areas within our control. Our effective tax rate was about 20%, primarily driven by discrete items related to foreign exchange impacts, largely from the strengthening of the Mexican peso.
Diluted earnings per share were $0.60, and EBITDA was 69 million, or about 12% of revenue. Overall results benefited from stronger margins, favorable foreign exchange, lower net interest expense in leasing and fleet management, and a lower effective tax rate. Turning to the balance sheet, we ended the quarter with total liquidity of approximately 887 million, representing 274 million in cash and 613 million of available borrowing capacity. Operating cash flow for the quarter reflects 227 million of investment, primarily for leased railcars purchased in the secondary market.
This investment supports our strategy to grow the lease fleet, increase recurring revenue, and generate tax-advantaged cash flows while maintaining strong asset quality and enhancing long-term earnings power. Over time, we expect to finance a portion of the newly acquired fleet, preserving balance sheet flexibility. We also refinanced our leasing term loan with a new $300 million facility, extending the maturity by six years, improving credit terms, and adding a delayed draw that provides up to $125 million of additional capacity to support future growth.
Our capital allocation remains disciplined and balanced. We continue to invest in opportunities that generate attractive returns while also returning capital to shareholders through dividends and share repurchases. Greenbrier's board of directors declared a dividend of 34 cents per share, marking our 49th consecutive quarterly dividend. At quarter end, approximately $65 million remained available under our share repurchase authorization. We will continue to use that capacity opportunistically, guided by market conditions and our broader capital allocation priorities.
Turning to guidance, our fiscal 2026 outlook is based on our latest view of fourth-quarter manufacturing margins and delivery timing, reflecting that some activity is moving into fiscal 2027 while near-term market conditions remain dynamic. Customer engagement is strong, and we are encouraged by the business activity developing for 2027. For fiscal 2026, we continue to expect total revenue of $2.4 billion to $2.5 billion and are narrowing our expected EPS range to $3 to $3.15 per share.
Additional details are included in the earnings release and accompanying slides. In summary, Greenbrier delivered solid third-quarter results supported by disciplined execution, resilient aggregate gross margins, and continued strength in leasing and fleet management. We remain focused on the priorities that create value, serving our customers, managing costs, increasing recurring revenue, and deploying capital with discipline. We believe these actions position Greenbrier to deliver attractive through-cycle returns and create long-term shareholder value.
With that, we'll open the call up for questions.
OPERATOR (Operator)
Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. At this time, we'll pause momentarily to assemble the roster. The first question will come from Andre Tomczyk with Goldman Sachs. Please go ahead.
Andre Tomczyk, Goldman Sachs
Hey, good evening everyone and thanks for taking my questions. Just curious if we could start off on the tariff front just to get a little more clarity there. Our understanding is recent amendments to Section 232 investigations could be imposing a tariff on the full value of tank cars coming into Mexico, coming out of Mexico, into the U.S. Maybe if you could just speak a little more to your current understanding of that tariff situation and what is Greenbrier's current tank car backlog mix.
And then maybe just on that, if you guys are actually incurring any tariffs there to start, that would be helpful.
Brian Comstock, Executive Vice President & President, The Americas
Thank you, Andre. Thanks. And I'll start out and I'm sure that my colleagues here will jump in and fill in if there's anything that I'm missing. Let me start with the beginning. We are not currently entering tank cars or paying a tariff for equipment that's coming from Mexico into the United States. As you state, there have been some recent pronouncements and determinations that are, that have industry-wide implications. And we and our industry partners are seeking guidance from CBP on how best to navigate that.
So really right now it's a situation where there have been some pronouncements made, but it's a change to what has been industry-wide practices. And so again we and our partners, whether they're the Class 1 railroads, the short lines or even other manufacturers, are seeking clarification from CBP on how to be compliant with the communications we've received.
Andre Tomczyk, Goldman Sachs
Understood. And then maybe just if we could get a sense for the mix of tank cars that you guys have in the backlog, that would be helpful. And then just I guess as a follow-up there, I guess two follow-ups, maybe if those, if it ended up that those tank car or the tariffs were applied to the tank cars, is there then risk of retroactive payments? Just to sort of be clear there. And then separately, are there discussions with customers that there could be potential price escalations if that were to be the case, in just trying to get a sense for if you guys could actually, you know, pass through those excess costs.
Lori
And I'll start with the last question first. Yes, we believe that any adjustments associated with tariffs would be passed through to our customers when it comes to retroactive obligations. Right now, that's unclear. And again, this is where we would say that we're seeking clarification from CBP on what some of the language in their rulings means and how we as an industry need to be compliant. And then to, I think the question I missed from the last as percentage of backlog.
So the backlog that Brian talked about, about 20% of that is tank cars.
Brian Comstock, Executive Vice President & President, The Americas
I would just add, Lori, that while it's 20% today, I think we're seeing the mix shift in the market kind of pivot away from tank cars. And so that mix is quickly diminishing. And Lori's right. We have provisions in all of our contracts to pass through tariffs and duties as appropriate. And just to the other thing to highlight, because sometimes folks in our industry tend to forget, but we build tank cars not only in Mexico using US sourced steel and other US source components, but we're also building tank cars in Arkansas at our Marmaduke facility.
Andre Tomczyk, Goldman Sachs
Interesting point. And just on that, if I could, what is the capability of shifting production there to the Arkansas facility? Is that something feasible at a later date?
Brian Comstock, Executive Vice President & President, The Americas
Absolutely. Well, we're building tank cars there right now and we are evaluating how much we could shift. A lot of this comes down to, you know, getting employees to be in our shops. I think this is a struggle for many industries in the United States. It's just finding and retraining and retaining a skilled workforce. Maybe just adding on, as Brian again is, at the end of the day, we are increasing production at our US facilities and we have the capability to take on quite a bit of that capacity if need be.
Andre Tomczyk, Goldman Sachs
Okay, thanks. Appreciate that color. Maybe just shifting to the core business. With the ISM now over 50 for half a year now, are you guys seeing any of that expectations optimism from your customers, I guess, creep into conversations? Or do you think that the positive ISM readings are more so a reflection of other areas of the economy? At the moment, I'm just trying to get a sense for when the broader ISM positivity might be able to translate into improving new railcar backlogs and deliveries.
Lori
So I'll kind of come high level. And I'm sure that Brian can speak to some of what he's hearing from our customers. But what I continue to hear and have been hearing for the last several months is a lot of desire from our customers for additional railcars. The interesting point though is as the macro environment continues to shift sometimes there it's creating a delay and when they want to execute on an investment in these long-lived assets. This is part of what Brian was speaking to I think before about trucking.
We are seeing some temporary shifts over to trucking. If we have a shipper customer that is trying to evaluate how best they navigate for their business, whether they're a farmer or a chemical company or otherwise how to navigate that. But we really do this is what we mean by we think there's quite a bit of pent up demand for new equipment. We just need the broader economy to kind of settle down for a little bit so that people can make those long-term investment decisions.
Brian Comstock, Executive Vice President & President, The Americas
Yeah. And I'll just add on to what Lori said. She's spot on. Directionally we've been watching the inquiries in the backlog and while it's been fairly stable over the last few quarters, the pent-up demand is really beginning to rise. You're seeing it on the AI data center infrastructure area where there's a lot of heavy-duty infrastructure required. So when you look at orders to production type of ratios, one of the things that's a bit of an anomaly is some of these cars we're taking in have three to four to five times the number of labor hours as a, let's call it like a tank car or covered hopper car.
And so it's not a one-for-one trade, it's kind of a four or five to one trade. We're also seeing significant improvement in the steel side of the industry as well. When you look at driver service rules and just kind of what's happening in the industry, intermodal is really feeling the pressure for growth as well. So the pent-up demand is a real thing. It's a matter. It's not if, it's just kind of when. And we're starting to see signs of that here in this quarter already.
Andre Tomczyk, Goldman Sachs
Got it. And maybe just one more for me before I hop back in the queue here just a little bit more specific in terms of the manufacturing margin. This quarter versus last was a nice uplift. Just curious if you could share whether mix was a positive this quarter and then maybe how you're thinking about core price vs mix dynamics here into the year end.
Brian Comstock, Executive Vice President & President, The Americas
As Brian again, Andre is, you know, at the end of the day, you know, mix always plays a bit of a role. But Lori kind of hit it in her comments and I think I touched on it briefly in mine as well as, you know, the initiatives we took a couple of years ago, the insourcing initiatives are really starting to pay off. And it's not just the insourcing investment we made on manufacturing primary parts, but also, you know, the focus we have on labor efficiency, the focus our team has on overhead and variable costs associated with that have really been paying off in this time.
You can look back in time in Greenbrier. I've been here a long time and we've never had these kinds of margins at this level of production, low level of production in the history of Greenbrier. So we're excited about the opportunity for this market to kind of change and see what we can really do as this, as the market continues, you know, rises back up.
Andre Tomczyk, Goldman Sachs
Understood. Thanks everyone. I'll hop back in the queue here.
OPERATOR (Operator)
The next question will come from Harrison Bower with Susquehanna. Please go ahead.
Harrison Bower, Susquehanna
Great. Thanks for taking my questions. Maybe to ask your sense of demand in a different way. How much of some of the regulatory backdrop on both the Section 232 proclamation on tank cars as well as your outstanding coupler and EPA case is eating into customer demand and sentiment on waiting for some clarity before going forward on some higher order amounts?
Lori
It's a great question, Harrison. And I would say, you know, quite honestly it's really not, that is not the bigger thing that's holding back our customers from making those decisions to invest in long-lived assets. It's, you know, it's again more the broader macroeconomic situation as they're figuring out how to either put existing equipment through a program, run it longer, maybe if they have pops in demand that if they can shift that over to trucking, they do that.
But that's really more where we're seeing the holdup is the macroeconomic situation, not what's going on with tariffs or couplers.
Brian Comstock, Executive Vice President & President, The Americas
Yeah. And I'll just tag on, you know, again, that is, it's spot on by Lori. But also keep in mind that there's a lot of Canadian customers that buy assets from us as well. And those tariffs and those things do not apply to cars that are being moved into Canada. It's really U.S. service at this point. So we're continuing to see that demand from a lot of the oil producers and chemical producers up in the Canadian region. But generally speaking, the US customers are not holding back because of any uncertainty at this point.
But we are seeing a shift again in mix to more covered hopper cars, flat cars, special purpose assets, and really higher value backlog for Greenbrier.
Harrison Bower, Susquehanna
Okay, thank you for that. And maybe, you know, sticking with some of the regulatory environment and on the coupler case, could you give us an update on where you're at with the EAPA determination? I know you're waiting to, you know, to appeal this case, I know it's a specific office within the CBP, but just any color on sort of what's going on in the coupler case and what your opportunities are in an adverse ruling to shift some of the coupler procurement to US sourced.
Lori
Sure. So today we actually filed our administrative appeal. So we have begun that process. And I just want to kind of take a big step back and say that the CBP determination letter does have industry-wide implications. Right. This is not just a Greenbrier situation, but it impacts everyone who's building cars that are bringing them into the United States from Canada or Mexico. And their determination letter included a change in practice that just like with the 232s, we and our industry partners are seeking guidance and clarification as how best to navigate this ruling and, you know, how best to be compliant.
That said, we do have, I would say, a very agile industry. We have a history of working together to figure out across a variety of landscapes how best to navigate, whether it's fluctuations in demand or situations that have to do with high prices of steel, whatever might be going on with couplers and where best to source them. So I have no doubt that as an industry, we will find a way to navigate this and come up with how best to continue serving our freight rail customers.
Brian Comstock, Executive Vice President & President, The Americas
Yeah, maybe I would just point out, Brian Harrison, is that, you know, while all of these are serious issues, the financial impact of the couplers is fairly small on a per unit basis. When you think about the total number of specialties and steel cost that's in the asset, it's probably less than 1% of the total impact. So from a customer perspective, it really doesn't have significant impact to them.
Harrison Bower, Susquehanna
Good point, Brian. Thanks. Okay, thanks for that. And maybe moving to the leasing side of things, the pretty substantial step up in your lease fleet quarter over quarter, can you walk through how you're thinking about building for your own fleet versus buying in the secondary market to grow that fleet over time and how much of the step up in leasing capex is related to producing more versus buying more in the secondary market.
Brian Comstock, Executive Vice President & President, The Americas
Yeah, it's Brian Harrison. So it's, it's really kind of a quarter by quarter call, to be honest, because we're looking at our concentration, we're looking at our covenants within our debt financing agreements. We're looking at how we balance these things materially each quarter. And so as books come to market, we evaluate whether or not that fits into our overall strategy from not only a concentration perspective and a risk perspective, but also from a commercial customer perspective.
And then we weigh that against what we're building ourselves internally. And so that's going to shift from quarter to quarter depending on how that looks. But it really is about managing the fleet in a very prudent and disciplined way. And I think discipline is. You're spot on. That's what it is, is looking at what are we building and what are those other opportunities that we can make an investment, whether it's investing in the cars that we're building or that someone else is putting out on the market to, to improve the quality and diversification of our, on the balance sheet fleet.
And Harrison, I would just add, you know, as we mentioned back, you know, a number of years ago on targets, you know, we're investing up to 300 million a year in, in the lease fleet. And so really that's not really impacting really how we're thinking about that. So.
Harrison Bower, Susquehanna
Okay, thanks. Broad strokes, is there a target of size of fleet that you'd want to get to by end of fiscal 2027 and maybe just some of your thoughts on the secondary market as a seller and where you would expect gains to land in the fourth quarter, what might be embedded in your guide and just an early look on gains on sale into next year.
Lori
Maybe the more strategic question is, you know, we've stated publicly and we continue to follow the rule that we're going to invest, as Michael said, about 300 million a year. Do we have an ultimate goal of size in mind? No, but we do want to transform the company to where the recurring revenue from the leasing is more substantial or as substantial as the manufacturing income. And so what does that mean? I don't know that we can tell you that precisely because some of it depends on mix.
And the previous question which you had, which was relative to how many of the new cars are going to go into the fleet versus how many cars we acquire in the secondary market, because it's not about overall fleet numbers, it's really about the quality assets and the earning power of each of those assets. That's a really good point. That's something we talk a lot about here internally, is we don't want to be spending money just so we can say we grew a fleet if it's not a good quality fleet.
So that's where I'm really proud of the team over the last couple of years is the focus on growing a quality fleet, which I think you can see from the first half of our fiscal year where we have some substantial gains on sale. Taking those opportunities into consideration, my recollection on gains on sale for the rest of the fiscal years, they're going to be probably fairly modest. But, Michael, I'll let you respond to that.
Michael Donfris, Senior Vice President, Chief Financial Officer
Right, right. We'll continue to look across the fleet and determine what makes sense as we think about concentration, as we think about just opportunistically what's out there. But you can, you can, you'll see that it's going to probably wind down in the fourth quarter.
Brian Comstock, Executive Vice President & President, The Americas
And, you know, I would just say about 2027, you know, it's a little bit early for us to start, you know, really kind of getting out there in terms of what we'll deliver in 2027. But we're going to go into planning here pre and be ready to talk about that when the time comes. And I think that's why having the liquidity that you highlighted, Michael, is so important, because we want to be able to take advantage of whatever situation. We unfortunately do not have a crystal ball into all of the other asset owners to know when they might be putting certain fleets out on the market.
So we want to be able to have strong liquidity so we can execute as it, as it makes sense for our fleet.
OPERATOR (Operator)
Lori, Brian, Michael, thank you all for the time today. Thank you. The next question will come from Ken Hexter with Bank of America. Please go ahead.
Adam Roskowski
Hi, it's Adam Roskowski on for Ken Hexter. Thanks for taking my question. Maybe just starting on the guidance. So no change to the revenue outlook, but lowering the midpoint of deliveries and gross margin and EPS. So maybe just I know you noticed some shift into 2027, but with revenue flat, is that implying higher selling price per car? Is there more maintenance revenue kind of baked into that? Maybe just help on the, on how should we interpret, you know, from a mix production leasing standpoint as well?
Lori
No, that's a really good question. You know, as we get through, looking through the fourth quarter, you know, obviously we're getting closer to, you know, what's actually happening. And as we look across what we see, you know, we are, as I mentioned in prepared remarks, we are seeing a little bit move into 2027. And also what we start looking at in terms of how much we were going to ramp up in Q4 and ramp up further, it just, we just haven't had to need to do that.
So there's been a little bit on absorption and that's impacting us as well. And so, you know, really a combination of those things. I wouldn't read that much into it. I'd say we're just getting much more closer to being able to call the year. And the other thing that I would point out is on the revenue is while the range didn't change, it's a pretty, it looks like it's a small range, but it's really a hundred million dollars. Right. So there's still enough there.
Adam Roskowski
Got it. Thanks for that. Maybe just getting going to 2027. How much visibility do you have into your production schedules? And you called out industry forecasts, you know, to 34k from 25k this year, 36% increase. Is that the right baseline to be thinking about the step up into next year? So any thoughts around that? Thanks.
Lori
Well, we're not prepared, I think, as Michael said, we're not really prepared to give explicit guidance on 2027. We do have, we're very happy with the pipeline that we have. We do believe that these, the customers are going to, those are going to convert into orders. It's just the timing of when they convert into orders is a little bit difficult obviously to predict in this current environment. And oh, and just one quick reminder so that some of the numbers that I was giving were calendar year. And even though I've been here for 31 years, I still can't figure out why we have a fiscal year that begins on September 1st. So there's a little bit of a mismatch there. But Brian, what did I miss on what you're thinking about for 2020? Our fiscal 27.
Brian Comstock, Executive Vice President & President, The Americas
Yeah. When you think about fiscal 27 and the visibility that we have going in, I think about it in terms backlog. So backlogs at 13,800 cars, roughly publicly disclosed, obviously we continue to renew that backlog on a quarter by quarter basis. So when you think about it, if we're going to produce, you know, historically kind of along the same lines we've always historically produced, you know, we've got visibility for the first, you know, several months into the, into the year.
Yeah. And I would say actually probably goes further out. It's just there's different gaps and sometimes having it's different lines, different gaps, different. Yeah, exactly. Sometimes having those gaps has been very beneficial for us because that means that when our customers start nearing the end of their calendar year and spending their allotted dollars, we've seen some interesting activity at times happen towards the end of a calendar year. Not to get too excited, thanks for that.
Adam Roskowski
And then last one, you noted some of the trucking market drivers and potential impacts that that could have on intermodal type cars. And it sounds like the mix is a bit broad based on what you've been calling out. But just any thoughts on rail service, these current levels and the extent that that or a deterioration in service or fluidity could spur maybe some upside into fiscal or calendar year 2027, however you want to frame it.
Lori
Sure. Again, we've been able to navigate any variety of markets. My overarching message is always about the railroads providing better service to our shipper customers so that we can grow modal share by rail. Let's make the pie bigger because then even if we stay at our current market share, everybody gets a bigger piece of pie. So that's the focus. I do think that that is what the class ones want to do. It's just I'm very thankful to not be the CEO of a Class 1 railroad because there's a lot of, a lot more levers and dials to manage than on my site.
Brian, what are you seeing?
Brian Comstock, Executive Vice President & President, The Americas
Yeah, you know, we're seeing definitely we're seeing a resurgence of intermodal on rail. I think it'll be interesting to see how railroads can respond to that from a labor perspective and whether or not they have power available on the network. You're starting to see a degradation of velocity on rail that's always, you know, good for the car builders, not necessarily good for the rail system itself. So we're always a bit conflicted by that. But one proxy we've always used and it's proved to be fairly, a fairly close signal is for every mile per hour of degradation and velocity or gain. It's about a 40,000 car demand change network wide. So you know, you think about degrading velocity, increased pressure on intermodal to grow and some of these other areas that could bode well for pent up demand in our space.
Adam Roskowski
Appreciate the time. Thank you again.
OPERATOR (Operator)
If you have a question, please press star and then one. Please stand by as we poll for questions. Showing no questions. This will conclude our question and answer session. I would like to turn the conference back over to Laura Tecorias for any closing remarks.
Laura Tecorias
I just want to say thank you everyone for your attention and for your time learning and understanding more about Greenbrier, and I wish everyone a safe and happy Fourth of July.
OPERATOR (Operator)
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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