Trinity Industries, Inc. TRN reported mixed results in the second quarter of 2018. The company’s earnings (excluding 5 cents from non-recurring items) of 48 cents per share beat the Zacks Consensus Estimate of 38 cents. Also, the bottom line soared 45.5% year over year. Results were aided by a low effective tax rate of 23.9% from the Tax Cut and Jobs Act. The comparable figure in the second quarter of 2017 was 40.9%.
Total revenues of $942.3 million however, missed the Zacks Consensus Estimate of $997.6 million. Nevertheless, the top line improved 4.1% from the year-ago quarter.
Segmental Results
The Rail Group recorded revenues of $575.2 million, up 23.5% year over year. Segmental operating profit came in at $57.7 million, up 57.2% on a year-over-year basis. This upside has been driven by higher railcar deliveries and better operational efficiencies. Notably, the group delivered 5,105 railcars and received orders for 8,320 railcars during the second quarter compared with 4,055 and 5,705, respectively, in the year-ago period.
The Railcar Leasing and Management Services Group recorded revenues of $213.4 million, up 11.1% from the prior-year period. Segmental operating profit came in at $91.8 million, down 17.1% from the year-earlier quarter. Revenues increased as a result of higher sales of railcars owned as well as additions to the lease fleet. However, as expected, average lease rates in the quarter were low, partly affecting revenue growth. Operating profit declined on account of lower profit from railcar sales and higher cost of sales.
The Inland Barge Group recorded revenues of $42.9 million, up 28.1%. Segmental operating profit skyrocketed more than 100% to $2.9 million in the reported quarter. Segmental results benefited from higher barge deliveries.
The Energy Equipment Group recorded revenues of $199.3 million, down 19.7% year over year. Operating profit in the segment was $13.1 million, down 45.6%. Decrease in volumes in the segment's wind towers product line among other factors led to this downside.
The Construction Products Group recorded revenues of $155.6 million, up 18.5% year over year. Segmental operating profit was $31.4 million, up 41.4%. The increase in revenues was mainly owing to higher volumes in the construction aggregates business and other businesses.
Trinity Industries, Inc. Price, Consensus and EPS Surprise
Trinity Industries, Inc. Price, Consensus and EPS Surprise | Trinity Industries, Inc. Quote
Liquidity & Buyback
At the end of the second quarter, this Zacks Rank #1 (Strong Buy) company had $612.7 million of cash and cash equivalents compared with $778.6 million at last year-end. Meanwhile, debt totaled $3,227.3 million as of Jun 30, 2018 compared with $3,242.4 million as of Dec 31, 2017. You can see the complete list of today’s Zacks #1 Rank stocks here.
During the second quarter, Trinity repurchased 1.45 million shares for approximately $50 million. The company still has $400 million under its current authorization to be bought back through December 2019.
Bullish 2018 Outlook
For the full year, the company estimates earnings per share (excluding transaction costs) of $1.45-$1.65. Previously, the estimate was in the $1.20-$1.40 range. The Zacks Consensus Estimate for full-year earnings stands at $1.52.
The company now expects full-year effective tax rate of 25% compared with 36.2% in 2017. Prior forecast had called for an effective tax rate of 24%.
Upcoming Releases
Investors interested in the broader Transportation sector are keenly awaiting second-quarter earnings reports from key players, namely C.H. Robinson Worldwide, Inc. CHRW, Expeditors International of Washington, Inc. EXPD and Air Lease Corporation AL. While C.H. Robinson will report second-quarter earnings on Jul 31, Expeditors and Air Lease will release the same on Aug 7 and Aug 9, respectively.
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