Trinity (TRN) Q4 Earnings & Revenues Beat, Increase Y/Y

Trinity Industries’ (NYSE:TRN) fourth-quarter 2019 earnings (excluding 18 cents from non-recurring items) of 35 cents per share surpassed the Zacks Consensus Estimate of 32 cents. Moreover, the bottom line surged approximately 35% year over year. Further, total revenues of $850.7 million beat the Zacks Consensus Estimate of $666.2 million. The top line also improved 15.7% year over year.

Following this better-than-expected performance, shares of the company gained more than 6% in after-hours trading on Feb 19.

Until third-quarter 2018, Trinity reported through five segments, namely 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 via the three segments of Railcar Leasing and Management Services Group, Rail Products Group and All Other Group.

The Railcar Leasing and Management Services Group generated revenues of $313.3 million, up 37.8% 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 $100.3 million, up 4.5% from the year-ago quarterly figure owing to factors like higher profits from sale of railcars and lease fleet growth. Moreover, the company’s lease fleet came in at 103,705 units as of Dec 31, 2019. The fleet size grew 4.5% from the December 2018 figure.

Revenues at the Rail Products Group (before eliminations) totaled $887.6 million, up 27.7% from the prior-year number. Segmental operating profit was $97.4 million compared with $44.1 million a year ago. Operating profit improved primarily on the back of higher railcar deliveries and favorable railcar product mix changes. Notably, the group delivered 6,880 railcars and received orders for 2,585 railcars compared with 5,285 and 8,045, respectively, in the year-earlier quarter.

Revenues at the All Other Group were $79.8 million, down 10.7% year over year. The decline was due to sluggish demand and lower shipping volumes in Trinity’s highway products operations. Segmental operating loss came in at $0.6 million against a profit of $8 million a year ago.

The company exited the fourth quarter with cash and cash equivalents of $166.2 million compared with $179.2 million at 2018 end. Meanwhile, debt totaled $4,881.9 million as of Dec 31, 2019 compared with $4,029.2 million at 2018 end. Trinity repurchased 13.7 million shares worth $294.7 million during 2019.

2020 Outlook

For the current year, earnings are anticipated in the range of $1.15-$1.35 per share. The Zacks Consensus Estimate for the same stands at $1.12. Additionally, revenues are estimated in the band of $2.5 billion-$2.7 billion. The consensus mark is pegged at $2.82. The guidance reflects the company’s consistent cost-cutting measures and its balance sheet optimization initiatives. Additionally, free cash flow (before leasing investment) is predicted between $600 million and $650 million.

Zacks Rank & Key Picks

Trinity carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Transportation sector are GATX Corporation (NYSE:GATX) , Azul S.A. (NYSE:AZUL) and Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (NYSE:VLRS) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

GATX has an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 21%. Meanwhile, shares of Azul and Controladora Vuela have rallied more than 30% and 65%, respectively, in a year.

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