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Trinity (TRN) Solid Liquidity Aids Amid Supply Chain Disruptions

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·3-min read
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Trinity Industries, Inc. TRN currently benefits from strong liquidity and increased demand for railcars. Meanwhile, supply chain disruptions and labor shortages are denting Trinity’s operations.

Trinity’s first-quarter 2022 adjusted earnings of 3 cents per share missed the Zacks Consensus Estimate of 16 cents. Results were hurt by supply chain disruptions and labor shortages. Total revenues of $473 million also lagged the Zacks Consensus Estimate of $603 million.

How is Trinity Faring?

With the recovery in the economy, an increase in demand for railcars is aiding Trinity. The company anticipates this improvement in railcar demand to continue throughout 2022. Higher delivery volumes and competitive pricing are driving revenues in the Rail Products Group. Segmental revenues increased 50% year over year in the March quarter, owing to higher delivery volumes.

Trinity's current ratio (a measure of liquidity) at the end of the first quarter of 2022 was 1.66, higher than the 1.62 recorded in fourth-quarter 2021. Also, the reading compared favorably with its industry's 1.45 at the end of first-quarter 2022.

Trinity’s operations are hurt by supply chain disruptions and labor shortages. Lower average lease rates hurt Railcar Leasing and Management Services Group revenues, which did not increase year over year in first-quarter 2022. Segmental revenues were hurt by lower average lease rates and reduced lease fleet size.

Zacks Rank & Key Picks

Trinity currently carries a Zacks Rank #3 (Hold). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Transportation sector are Ryder System, Inc. R, C.H. Robinson Worldwide, Inc. CHRW and GATX Corporation GATX.

Ryder has a trailing-four quarter surprise of 48.2%, on average, with its earnings surpassing the Zacks Consensus Estimate in all the last four quarters. R is benefiting from improving economic and freight conditions in the United States.

Revenues in all segments grew (on higher rental revenues, new business and favorable pricing) in first-quarter 2022. R currently carries a Zacks Rank #2 (Buy).

The expected long-term (three-to-five years) earnings per share (EPS) growth rate for C.H. Robinson is pegged at 9%. Improving freight market conditions are aiding CHRW.

In first-quarter 2022, the top line improved 41.8%, owing to favorable truckload pricing for customers and handsome profits in ocean freight. CHRW currently sports a Zacks Rank #1.

GATX has a trailing-four quarter surprise of 40.1%, on average, with its earnings surpassing the Zacks Consensus Estimate in all the last four quarters. The gradual improvement in the North American railcar leasing market is a huge positive for GATX.

Driven by the upsides, the stock has risen 7.1% in the past year.  GATX currently has a Zacks Rank of 2.


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