Here's Why Investors Should Give Trinity (TRN) a Miss Now
Trinity Industries TRN is currently mired in multiple headwinds, which we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 2.63% downward over the past 60 days. For the current year, the consensus estimate for earnings has moved 10.78% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Lackluster Price Performance: TRN shares plunged 20.1% year to date against its industry’s 5% growth.
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Weak Zacks Rank and Style Score: Trinity Industries currently carries a Zacks Rank #5 (Strong Sell). Moreover, TRN’s current Momentum Style Score of C shows its short-term unattractiveness.
Other Headwinds: Trinity’s operations are being hurt by supply-chain disruptions and labor shortages. Notably, labor and supply-chain challenges faced by Trinity's Rail Products Group have been impacting deliveries and margins of the segment lately.
TRN’s liquidity position is a worry as well. Trinity exited the March quarter with current ratio (a measure of liquidity) of 1.80, lower than the December quarter's reading of 1.90. Declining current ratio may imply an increase in short-term debt, a decrease in current assets, or a combination of both.
Bearish Industry Rank: The industry to which TRN belongs currently has a Zacks Industry Rank of 168 (of 250 plus groups). Such an unfavorable rank places TRN in the bottom 33% of the Zacks industries. Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.
A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Therefore, reckoning the industry’s performance becomes imperative.
Stocks to Consider
Some better-ranked stocks in the Zacks Transportation sector are Copa Holdings CPA and Global Ship Lease GSL , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Copa Holdings is benefiting from an improvement in air-travel demand. In first-quarter 2023, passenger revenues increased 28.5% from first-quarter 2019 levels due to higher yields.
CPA’s focus on its cargo segment is encouraging. In first-quarter 2023, cargo and mail revenues grew 51.8% from first-quarter 2019 levels on higher cargo volumes and yields.
Copa Holdings' fleet modernization and cost-management efforts are commendable. The Zacks Consensus Estimate for current-year earnings has been revised 25.3% upward over the past 60 days.
Global Ship Lease is being aided by the bullish sentiment surrounding the containership market. GSL’s strong balance sheet is an added positive. An uptick in trading volumes bodes well for GSL.
The Zacks Consensus Estimate for current-year earnings has moved up 4.2% over the past 60 days. GSL outpaced the Zacks Consensus Estimate for earnings in each of the last four quarters, the average beat being 15.64%.
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Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
Trinity Industries, Inc. (TRN) : Free Stock Analysis Report
Global Ship Lease, Inc. (GSL) : Free Stock Analysis Report
