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Trinity (TRN) Q1 Earnings Beat on Robust Segmental Revenues

Zacks Equity Research

Trinity Industries, Inc.’s TRN first-quarter 2019 adjusted earnings of 24 cents per share outpaced the Zacks Consensus Estimate by 2 cents. Strong segmental performance boosted the results. Total revenues came in at $604.8 million, which missed the Zacks Consensus Estimate of $637 million.

Segmental Update

Until third-quarter 2018 results, Trinity reported through five segments — Rail Group, Construction Products Group, Inland Barge Group, Energy Equipment Group and Railcar Leasing and Management Services Group. Post the completion of a spin-off transaction with its infrastructure-related businesses — Acrosa — on Nov 1, 2018, the company currently reports through three segments — Railcar Leasing and Management Services Group, Rail Products Group and All Other Group.

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 first-quarter 2018.

Revenues in the Rail Products Group (before eliminations) 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%.  Higher revenues and operating profit can be attributed to increased demand and expanded volumes in highway products and logistics businesses.

Trinity Industries, Inc. Price, Consensus and EPS Surprise

 

Trinity Industries, Inc. Price, Consensus and EPS Surprise | Trinity Industries, Inc. Quote


Liquidity & Share Repurchases

This Zacks Rank #4 (Sell) 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.

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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.

2019 Outlook

Trinity anticipates earnings per share of $1.15-$1.35 for the full year, themid-point of which is $1.25, below the Zacks Consensus Estimate of $1.32. However, the company’s earnings estimate indicates a year-over-year increase of 64-93%. Additionally, 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 envisioned in the 23,500-25,500 range.  Further, operating profit at the All Other Group is anticipated in the $18-$22 million range.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting first-quarter earnings reports from key players, namely Expeditors International of Washington, Inc. EXPD, C.H. Robinson Worldwide, Inc. CHRW and Air Lease Corporation AL. While C.H. Robinson will report first-quarter earnings on Apr 30, Expeditors and Air Lease will announce the same on May 7 and May 9, respectively.

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