Will Trinity Industries (TRN) Disappoint In Q2 Earnings?

Dallas, TX-based Trinity Industries Inc. (NYSE:TRN) provides products and services to the energy, transportation, chemical and construction sectors, across the globe. The company is scheduled to report second-quarter 2017 results on Jul 25, after market close.

In the first quarter of 2017, the company had delivered a positive earnings surprise of 7.14%. Moreover, its earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 16.62%. Let’s see how things are shaping up for this announcement.

Factors Likely at Play

We expect Trinity Industries to continue struggling on the top-line front in the to-be-reported quarter just like the previous quarter. Weak market conditions as well as sluggish demand for railcars are expected to weigh on the results this quarter. High costs and adverse foreign currency movement may also prove to be detrimental.

In fact, the Rail Group segment that recorded disastrous results in the first quarter, is expected to continue its poor run in the second quarter as well. Also, the Inland Barge Group might come up with a below-par performance, mainly due to lower barge deliveries and changes in product mix.

Additionally, the Energy Equipment Group might perform poorly in the quarter mainly due to lower delivery volumes. However, the company’s efforts to reward shareholders are encouraging. During the second quarter, the company also increased its quarterly dividend by 18%.

Earnings Whispers

Our quantitative model doesn’t point to an earnings beat this time. Here’s why:

Trinity Industries doesn’t have the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – for increasing the odds of an earnings beat.

Zacks ESP: Trinity Industries has an Earnings ESP of -6.45%. This is because the Most Accurate estimate of 29 cents is lower than the Zacks Consensus Estimate by 2 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Trinity Industries carries a Zacks Rank #2 (Buy), but this alone isn’t enough to increase the chance of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) while going into an earnings announcement.

Stocks to Consider

With Trinity Industries likely to disappoint, investors interested in the broader transportation sector may consider American Airlines Group, Inc. (NASDAQ:AAL) , Alaska Air Group, Inc. (NYSE:ALK) and Canadian National Railway Company (NYSE:CNI) , since our model shows that all these stocks possess the right combination of elements to post an earnings beat in their next releases.

American Airlines has an Earnings ESP of +2.19% and a Zacks Rank #1 (Strong Buy). The company is slated to release its second-quarter 2017 results on Jul 28. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alaska Air Group has an Earnings ESP of +0.40% and a Zacks Rank #2. The company will report its second-quarter 2017 financial numbers on Jul 26.

Canadian National Railway has an Earnings ESP of +2.02% and a Zacks Rank #2. The company will release its second-quarter 2017 earnings numbers on Jul 25.

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