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Trinity (TRN) Shares Up 4% Since Q2 Earnings: Here's Why

Zacks Equity Research
·4-min read

Shares of Trinity Industries TRN have gained 4% since its second-quarter 2022 earnings release on Jul 27. However, the performance was not very impressive, with TRN reporting in-line earnings per share and lower-than-expected revenues. The stock price uptick may be owing to management’s commentary that results in the latter half of the year are likely to be driven by “rising lease rates and fleet utilization”. Per Trinity’s CEO and president Jean Savage, “We continue to feel confident about the second half of the year and expect to see strengthening results across our business.” Favorable earnings guidance also contributed to this upside.

What Does Trinity Q2 Report Unveil?

Trinity’s earnings (excluding 10 cents from non-recurring items) of 14 cents per share matched the Zacks Consensus Estimate Quarterly earnings declined 6.7% year over year. Total revenues of $416.8 million fell short of the Zacks Consensus Estimate of $651.3 million. Results were hurt by supply-chain disruptions and labor shortages. The top line, however, increased 12.2% year over year, aided by higher external deliveries in the Rail Products unit.

The Railcar Leasing and Management Services Group generated revenues of $195.3 million, up 5.5% year over year. Segmental revenues were boosted by higher utilization, increased lease fleet size and improved renewal rates.

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Revenues in the Rail Products Group (before eliminations) totaled $430.6 million, up 65% year over year. Higher delivery volumes and favorable pricing boosted segmental revenues. Segmental operating profit was $13.7 million compared with only $3.2 million in the year-ago period.

During the second quarter, Trinity rewarded its shareholders with dividends worth $20.2 million. On a year-to-date basis, Trinity has returned $90 million of capital to its stockholders. Free cash flow generated during the period was $43 million.

Trinity, presently carrying a Zacks Rank #2 (Buy), exited the June quarter with cash and cash equivalents of $49.7 million compared with $167.3 million at the end of December 2021.

Debt totaled $5,539.1 million as of Jun 30, 2022, compared with $5,170.6 million at the end of 2021.

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

2022 Outlook

Trinity expects industry deliveries of 40,000-50,000 railcars in 2022. Net investment in lease fleet is estimated to be $425-$475 million. TRN anticipates manufacturing capital expenditures of $35-$45 million in 2022. Earnings per share are forecast to be 90 cents-$1.10 in 2022 (earlier guidance: 85 cents-$1.05). The Zacks Consensus Estimate for the same stands at $1.04, above the mid-point ($1) of the guided range.

Earnings Snapshots

Within the broader Transportation sector, the likes of J.B. Hunt Transport Services JBHT, CSX Corporation CSX and United Airlines UAL  have reported second-quarter 2022 results so far.

J.B. Hunt reported better-than-expected second-quarter 2022 results, wherein both earnings and revenues outperformed the Zacks Consensus Estimate.

Quarterly earnings of $2.42 per share surpassed the Zacks Consensus Estimate of $1.61 and improved 50.3% year over year. Total operating revenues of $3,837.53 million also outperformed the Zacks Consensus Estimate of $2,908.37 million. The top line jumped 32% year over year on the back of segmental strength. Total operating revenues, excluding fuel surcharges, rose 21.2% year over year.

Quarterly operating income (on a reported basis) climbed 46.2% to $353.08 million on higher volumes, customer rate and cost-recovery efforts. Operating expenses escalated 30.6% to $3.48 billion.

CSX reported better-than-expected second-quarter 2022 results, wherein both earnings and revenues outperformed the Zacks Consensus Estimate.

Quarterly earnings of 50 cents per share (excluding 4 cents from non-recurring items) beat the Zacks Consensus Estimate of 47 cents and improved 25% year over year.

Total revenues of $3,815 million outperformed the Zacks Consensus Estimate of $3,642.2 million. The top line increased 28% year over year on the back of higher revenues in almost all markets, driven by pricing gains, fuel surcharge and contribution from the acquisition of Quality Carriers. Overall revenues per unit increased 27%.

United Airlines’ second-quarter 2022 earnings (excluding 43 cents from non-recurring items) of $1.43 per share fell shy of the Zacks Consensus Estimate of $1.86. Escalated operating expenses induced the earnings miss.

The second quarter of 2022 was the first profitable period at UAL since the onset of the pandemic. Operating revenues at United Airlines came in at $12,112 million, beating the Zacks Consensus Estimate of $12,033.7 million.


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