It has been about a month since the last earnings report for Trinity Industries (TRN). Shares have lost about 3.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Trinity Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Earnings Beat at Trinity in Q1
The company's adjusted earnings of 24 cents per share outpaced the Zacks Consensus Estimate by 2 cents. Total revenues came in at $604.8 million, which missed the Zacks Consensus Estimate of $637 million.
The Railcar Leasing and Management Services Group generated revenues of $200.4 million, up 14.8% year over year. Segmental operating profit came in at $85.8 million, up 20.7% year over year. The upside was driven by lease fleet growth and profits from railcar sales among other factors. Moreover, the company’s lease fleet came in at 101,005 units as of Mar 31, 2019. The fleet size grew 9% compared with the figure at the end of the first quarter of 2018.
Revenues in the Rail Products Group totaled $603.6 million, up 2.6% from the prior-year quarter’s tally. Segmental operating profit came in at $50.6 million, down 1.7% from the prior-year quarter’s figure. Operating profit declined primarily due to production inefficiencies. Notably, the group delivered 4,505 railcars and received orders for 3,000 railcars compared with 5,725 and 4,705 in the year-ago quarter, respectively.
Revenues in the All Other Group grossed $86.4 million, up 11.8% year over year. Segmental operating profit came in at $6.6 million, up 13.8%. The increase in revenues and operating profit can be attributed to increased demand and higher volumes in highway products and logistics businesses.
Liquidity & Share Repurchases
The company exited the first quarter with cash and cash equivalents of $73.9 million compared with $179.2 million at the end of 2018. Meanwhile, debt totaled $4,466.4 million as of Mar 31, 2019 compared with $4,029.2 million as of Dec 31, 2018.
During the first quarter, Trinity repurchased 3.5 million shares for approximately $89 million. Additionally, the company has announced a new buyback program worth $350 million for the period 2019-2020.
The company anticipates earnings per share of $1.15 - $1.35 for the full year. Moreover, Leasing and management revenues are estimated in the range of $775 - $790 million, while operating profit for the segment is projected between $320 million and $330 million. Meanwhile, Rail Products Group revenues are expected in the band of $3.1-$3.3 billion. Operating margin for the segment is estimated in the range of 9-9.5%. Railcar deliveries for the year are estimated in the 23,500-25,500 range. Additionally, operating profit at the All other group are anticipated in the $18-$22 million range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -24.78% due to these changes.
At this time, Trinity Industries has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Trinity Industries has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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