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Trinity Rallies 22% In a Year: What's Driving the Stock?

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Trinity Rallies 22% In a Year: What's Driving the Stock?

Trinity (TRN) benefits from strong industrial production, lower tax rate as well as consistent efforts to reward shareholders through dividends and share buybacks.

Shares of Trinity Industries, Inc. TRN have fared well in a year’s time. The stock has gained 22.3% in the past year compared with the industry’s rise of 13.3%

Reasons for Robust Price Performance

Trinity has an impressive surprise history. It surpassed earnings estimates in each of the trailing four quarters, the average being 24.9%.

The Dallas, TX-based diversified industrial company benefits from strong industrial production and consistent business investments. The upbeat scenario has propelled the company to raise earnings outlook for 2018. In fact, the company anticipates earnings per share (EPS), excluding transaction costs, in the range of $1.45-$1.65 compared with the previous projection of $1.20-$1.40.

Moreover, the company expects to complete the spin-off of infrastructure-related businesses, Arcosa, by the end of 2018. Post completion, the separation will empower the company to focus on core strength areas. Owing to this, the company recently announced the composition of the board after the spin-off.

Furthermore, the company is being aided by a lower effective tax rate. To this end, it estimates full-year effective tax rate at 25% compared with 36.2% in 2017. The rail lease fleet is also expected to grow.

Additionally, Trinity’s consistent efforts to reward shareholders in the form of dividends and share buybacks look impressive. On the buyback front, the board authorized a new share repurchase program valued at $500 million in December 2017. The company also possesses an impressive dividend payment history. In May 2018, Trinity raised quarterly dividend by 18% to 13 cents.

The company has an impressive Value Score of B, which reflects attractive valuation. The positivity revolving around the stock can be gauged from the Zacks Consensus Estimate being revised 8.7% upward in the past 60 days for current-year earnings.

In light of these positives, we believe that Trinity should be added by investors for handsome returns. The Zacks Rank #1 (Strong Buy) sported by the stock seems to suggest the same.

Other Stocks to Consider

Investors interested in the broader Transportation Sector may also consider stocks like ArcBest Corporation ARCB, SkyWest, Inc. SKYW and Matson, Inc. MATX, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of ArcBest, SkyWest and Matson have gained 41.7%, 5.8% and 34.7% in the past six months, respectively.

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