Trinity Industries Inc.
) has delivered positive earnings surprises in three out of the
last four quarters outpacing the Zacks Consensus Estimate by an
average of 18.2%. This railcar manufacturer reported excellent
second-quarter 2012 financial results lifting the stock price by
Following this strong performance, earnings estimates have been
moving higher, helping Trinity achieve a Zacks #1 Rank (Strong Buy)
on Aug 15, 2012. A bright financial outlook along with a forward
P/E of just 9.3 makes Trinity an attractive pick for value
A Robust Quarter
On July 25, Trinity reported strong financial results for the
second-quarter 2012. Earnings per share of 84 cents surpassed the
Zacks Consensus Estimate by 11 cents (15.1%) and the year-ago
earnings by a convincing 47 cents (127%). Total revenue of $1.02
billion beat the Zacks Consensus Estimate by 3.3% and increased
45.2% year over year. All the six reporting segments of the company
generated significant year-over-year revenue growth.
Trinity expanded margins across the board in the second quarter.
Gross margin was 20.1%, an improvement of 40 basis points over the
prior-year quarter. Operating margin was 14.7%, up 170 basis points
over the prior-year quarter, and net margin was 6.6%, up 240 basis
points year over year. EBITDA was $204.8 million, up a sharp 42%
over the prior-year quarter.
Increasing demand for railcars, specialty barges, and tank
containers enabled management to raise its fiscal 2012 earnings per
share guidance from $2.55 - $2.70 to $2.95 - $3.10. As of June 30,
2012, Trinity had $3.2 billion of railcar backlog, $542 million of
inland barge backlog, and $817 million of structural wind tower
Estimate Revisions Shoot Up
Estimates for Trinity have been rising over the last 60 days. The
Zacks Consensus Estimates moved up 10.9% to $3.05 for 2012 and 5.4%
to $3.51 for 2013. The current Zacks Consensus Estimates indicate a
solid year-over-year gain of almost 84.8% for 2012 and 15.2% for
Plenty of Value
Trinity's shares had taken a dive from March 2012. However, the
trend reversed from July 25 with the shares returning to a growth
Going forward, there is an untapped potential locked in the stock.
This is evidenced by its current forward P/E of just 9.30, a P/S of
only 0.61, and P/B multiple of just 1.12 (a P/E ratio below 15.0, a
P/S ratio below 1.0, and a P/B ratio under 3.0 generally indicate
The above multiples are in contrast to the peer group average of
9.90x, 0.67x, and 1.46x, respectively, indicating that Trinity is
at present highly undervalued.
Other solid multiples speaking in Trinity's favor are a trailing
12-month ROE of 10% and a current dividend yield of 1.6% compared
with the industry average of a paltry 0.6%.
The widening gap between the stock price line and the estimate
lines of 2012 and 2013 indicates that Trinity is currently
undervalued. This should encourage investors as the company is
likely to sustain its positive trend riding on the back of a
growing U.S. transportation, energy, and construction industry.
Headquartered in Dallas, Texas, Trinity Industries Inc. was founded
in 1933. The company serves several industries including
transportation, construction, and energy through its products and
services. The company operates predominantly in the U.S., Canada,
Mexico, the U.K., Singapore, and Sweden.
TRINITY INDS IN (TRN): Free Stock Analysis
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