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Trinity Industries (TRN) Stock Gains on Upbeat '19 EPS View

Shares of Trinity Industries TRN gained 5.3% on Nov 16 to close the trading session at $22.90. Notably, this transportation company’s decision to increase its earnings per share guidance for 2019 led to the uptick.

The company now expects 2019 earnings between $1.15 and $1.35 per share (the earlier guidance had predicted the metric between 90 cents and $1.10). Trinity’s decision to raise its earnings guidance can be primarily attributed to the accelerated share repurchase (“ASR”) program with JPMorgan announced on the same day.

The receipt of orders for new railcars also contributed to the bullish guidance. As a result, the guidance for 2019 railcar deliveries also increased to the 23,500-25,500 range (earlier guidance projected the same between 22,500 and 24,000 railcars). 

The ASR program, which commences today, is anticipated to boost Trinity’s 2019 earnings per share to the tune of 13 cents (based on Nov 15’s closing price). Under the scheme, this Dallas, TX- based company has agreed to buyback $350 million of its common stock from JPMorgan. Approximately 12.9 million shares are anticipated to be delivered initially.

The ASR program will be funded by proceeds from an amended and restated term loan agreement.  Additionally, it will exhaust the company’s current buyback authorization worth $500 million of its common stock.

Price Performance

Trinity has underperformed its industry so far this year. The Zacks Rank #3 (Hold) stock has shed 38.8% of its value compared with its industry’s 12.5% decline.

Year-to-Date Price Performance

 

However, the company’s recent decision to increase its 2019 bottom line and railcar delivery projections bode well for the stock. We are also positive on Trinity’s decision to spin off its infrastructure-related businesses, Arcosa. The transaction was completed on Nov 1, 2018.

Stocks to Consider

A few better-ranked stocks in the broader Transportation sector are CSX Corporation CSX, Canadian Pacific Railway Limited CP and Hertz Global Holdings, Inc. HTZ. While Hertz Global carries a Zacks Rank #2 (Buy), CSX Corporation and Canadian Pacific sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Hertz Global, CSX Corporation and Canadian Pacific have gained 14.1%, 13.5%, and 14.4% respectively, in the past six months.

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