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Trinity (TRN) Slips to 52-Week Low: What's Ailing the Stock?

Zacks Equity Research

Shares of Trinity Industries TRN slipped to a 52-week low of $18.19 a piece on Jul 25. The stock recovered marginally to close the trading session at $18.3, reflecting an 11.6% decline from Jul 24’s closing price. Notably, the company’s disappointing bottom-line performance in second-quarter 2019 announced on Jul 24, after market close, was the reason behind the sharp decline in price.

Q2 Earnings

Trinity Industries’ second-quarter 2019 adjusted earnings of 29 cents per share fell short of the Zacks Consensus Estimate by 2 cents. The bottom line also declined significantly on a year-over-year basis mainly due to loss from discontinued operations. Total revenues came in at $736 million, which surpassed the Zacks Consensus Estimate of $695.2 million.

Until third-quarter 2018, 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 primarily 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 $277.1 million, up 29.9% year over year. Segmental operating profit came in at $104.8 million, up 14.2% year over year. The upside was driven by lease fleet growth and higher volume of railcars sold. Moreover, the company’s lease fleet came in at 102,140 units as of Jun 30, 2019. The fleet size grew 9% compared with the figure at the end of second-quarter 2018.

Revenues at the Rail Products Group (before eliminations) totaled $712.3 million, up 26% from the prior-year quarter’s tally. Segmental operating profit came in at $68 million, up 40.2% from the year-ago quarter’s figure. Operating profit improved primarily due to favorable railcar pricing and product mix changes. Notably, the group delivered 5,255 railcars and received orders for 2,105 railcars compared with 5,105 and 8,320 in the year-ago quarter, respectively.

Revenues at the All Other Group grossed $88.5 million, down 4% year over year. The decline was due to sluggish demand and lower shipping volumes in Trinity’s highway products operations. Segmental operating profit came in at $6.2 million, down 50% year over year. Profit was halved mainly due to higher selling, engineering, and administrative expenses.

Trinity Industries, Inc. Price, Consensus and EPS Surprise

 

Trinity Industries, Inc. Price, Consensus and EPS Surprise

Trinity Industries, Inc. price-consensus-eps-surprise-chart | Trinity Industries, Inc. Quote

This Zacks Rank #3 (Hold) company exited the second quarter with cash and cash equivalents of $102.8 million compared with $179.2 million at the end of 2018. Meanwhile, debt totaled $4,615.9 million as of Jun 30, 2019, compared with $4,029.2 million at 2018 end. During the second quarter, Trinity repurchased 2.1 million shares for approximately $44 million.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For 2019, Trinity still anticipates earnings per share of $1.15-$1.35, the mid-point of which is $1.25. Notably, the mid-point lies below the Zacks Consensus Estimate of $1.35. Additionally, Leasing and Management revenues are estimated in the range of $760-$775 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-$3.2 billion. Operating margin for the segment is estimated in the range of 9-9.5%. Railcar deliveries for the year are now envisioned in the 23,000-24,500 range (previous guidance: 23,500-25,500). Further, operating profit at the All Other Group is anticipated in the $15-$20 million range.

Upcoming Releases

Investors interested in the Zacks Transportation sector are keenly awaiting second-quarter 2019 earnings reports from key players like C.H. Robinson CHRW, SkyWest SKYW and GOL Linhas GOL. While C.H. Robinson is scheduled to report second-quarter 2019 results on Jul 30, SkyWest and GOL Linhas will do so on Jul 31 and Aug 1, respectively.

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