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It has been about a month since the last earnings report for Trinity Industries (TRN). Shares have added about 5.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Trinity Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Earnings Miss at Trinity in Q1
Trinity’s earnings of 11 cents per share (excluding $1.22 from non-recurring items) missed the Zacks Consensus Estimate of 14 cents. Moreover, the bottom line plunged 54.2% year over year. However, total revenues of $615.2 million surpassed the Zacks Consensus Estimate of $478.5 million. The top line also inched up 1.7% year over year on higher volume of railcars.
The Railcar Leasing and Management Services Group generated revenues of $236.3 million, up 17.9% year over year. The upside was primarily owing to growth in lease fleet, higher volume of railcars sold and favorable average lease rates.
Segmental operating profit summed $92.9 million, up 8.3% from the year-ago figure on higher profits from sale of railcars and lease fleet growth. Moreover, the company’s lease fleet came in at 103,815 units as of Mar 31, 2020. The fleet size grew 2.8% from the March 2019 figure.
Revenues at the Rail Products Group (before eliminations) totaled $509.4 million, down 18.9% from the prior-year number. Segmental operating profit was $25.1 million compared with $47.1 million a year ago. The decline in revenues and operating profit was due to low railcar deliveries and reduced operational efficiency. Notably, the group delivered 3,705railcars and received orders for 1,970 railcars compared with 4,505 and 3,000, respectively, in the year-earlier quarter.
Revenues at the All Other Group (primarily includes results of highway products business) were $63.4 million, slightly up year over year buoyed by higher demand and the resultant rise in shipping volumes at highway products operations. Segmental operating profit came in at $9.3 million, compared with $10.1 million in the first quarter of 2019.
The company exited the first quarter with cash and cash equivalents of $213.2 million compared with $166.2 million at 2019-end. Meanwhile, debt totaled $4,870.2 million as of Mar 31, 2020, compared with $4,881.9 million at the end of 2019. Trinity repurchased approximately 1.9 million shares worth $35.4 million during the first quarter.
Although the first quarter wasn’t impacted much, Trinity expects the pandemic to affect its near-term performance. To combat the crisis, the company has cut back on non-essential expenses apart from implementing other cost-saving initiatives. It expects to reduce costs by $25-$30 million in 2020 through these endeavors.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -65.22% due to these changes.
At this time, Trinity Industries has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 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 this revision indicates a downward shift. It's no surprise Trinity Industries has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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