A month has gone by since the last earnings report for Trinity Industries (TRN). Shares have lost about 8.2% in that time frame, underperforming 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 Q4
The company’s earnings (excluding 7 cents from non-recurring items) of 26 cents per share outpaced the Zacks Consensus Estimate by 3 cents. However, the bottom line declined on a year-over-year basis primarily due to high costs.
Total revenues came in at $735 million, which surpassed the consensus mark of $673.2 million. Strong segmental performance boosted top-line results.
The Railcar Leasing and Management Services Group generated revenues of $227.3 million, up 15.3% year over year. Segmental operating profit came in at $96 million, down 25.1% on a year-over-year basis. The downside was caused by higher depreciation expenses related to growth of lease fleet and change in mix of railcars sold from the lease fleet. Nevertheless, the company’s lease fleet came in at 99,215 units as of Dec 31, 2018. The fleet size grew 12% compared with the figure at the end of 2017.
Revenues in the Rail Products Group increased 8.9% from the prior-year quarter’s tally and accounted for more than 56% of the top line in the quarter. Segmental operating profit came in at $44.1 million, down 39.9% from the prior-year quarter’s figure. Operating profit declined due to lower volume, product mix changes and pricing pressures. Notably, the group delivered 5,285 railcars and received orders for 8,045 railcars compared with 6,150 and 3,180 in the year-ago quarter, respectively.
Revenues in the All Other Group grossed $89.7 million, up 11.7% year over year. The upside can be attributed to higher volumes in highway products businesses. Segmental operating profit came in at $7.9 million in the quarter under review, against a loss of $1.7 million in the year-ago quarter. Lower litigation expenses and insurance recoveries associated with the damage previously recovered at two highway manufacturing facilities led to this upside.
Liquidity & Share Repurchases
The company exited 2018 with cash and cash equivalents of $179.2 million compared with $778.6 million at the end of 2017. Meanwhile, debt totaled $4,029.2 million as of Dec 31, 2018 compared with $3,241.9 million as of Dec 31, 2017.
During the fourth quarter, Trinity repurchased 12.9 million shares for approximately $280 million.
For 2019, Trinity maintains its projection for total earnings per share in the range of $1.15-$1.35. Interest expense is projected to be around $225 million. Moreover, tax rate is estimated at 27%.
The company anticipates segmental revenues in Railcar Leasing and Management Services Group in the range of $770-$785 million. Segmental operating profit is estimated in the range of $310-$320 million. Furthermore, net lease fleet investment in the segment is anticipated in the range of $1.2-$1.4 billion in 2019.
Revenues in the Rail Products Group are in the range of $3.1-$3.3 billion. Segmental operating margin is projected in the range of 9-9.5%. The segment also maintains projections related to deliveries between 23,500 and 25,500 railcars in 2019.
Also, operating profit in All Other Group is projected around $10 million.
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 -39.86% due to these changes.
At this time, Trinity Industries has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.
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