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Greenbrier shares jump on surge in rail orders

BOSTON (AP) -- Shares of Greenbrier Cos. surged on Tuesday after the railcar company announced a recent surge of customer orders, in part due to increased shipping by oil producers and automakers.

THE SPARK: After markets closed on Monday, Greenbrier said that it had received orders for more than 4,200 railcars since Sept. 1, the start of the company's current fiscal year. Greenbrier said the orders from North American and European markets were valued at more than $430 million.

About $160 million of that total is from orders for 1,250 tanker cars to ship crude oil produced in shale fields in North America. Greenbrier has also received orders in North America and Europe for 1,400 automobile-hauling railcars valued at $140 million.

THE BIG PICTURE: Greenbrier and other railcar companies have seen a surge in business as a result of the recent boom in production of oil from shale deposits, as plans for new pipelines stall. Rail companies have also benefited from the recovery of the U.S. automotive industry, which has increased rail shipments of cars and trucks.

THE ANALYSIS: Michael Baudendlstel and John Larkin, analysts with Stifel Nicolaus, said in a note to the firm's clients that the average unit value for the tankers and auto-hauling railcars is higher than it has been in the past, which should benefit the company's profit margins in the current fiscal year.

The past four months of orders represent about four months of the company's production level, which has recently increased, the analysts said. A shift in the company's production to higher-margin tanker cars should also boost overall profitability at Greenbrier, they said.

"It is clear to us the company is gaining traction with its strategy to expand tank car production capacity," they said.

SHARE ACTION: Shares of the Lake Oswego, Ore., company rose 85 cents, or 5.2 percent, to $17.17 in afternoon trading. Over the past 52 weeks, the company's shares have traded between $13.10 and $26.66.

The stock dropped 11 percent on Dec. 21 after Greenbrier rejected a sweetened $22-per-share buyout offer from American Railcar Industries Inc. that valued Greenbrier at about $596 million. Activist investor Carl Icahn holds a controlling stake in American Railcar, which he tried unsuccessfully to combine with Greenbrier in 2008. Last year, Icahn bought a 9.99 percent stake in Greenbrier.