Stifel Raises Price Target on Trinity Industries (TRN) to $22 Ahead of Oral Arguments
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Stifel reiterated a Hold rating on Trinity Industries (NYSE: TRN), and raised the price target to $22.00 (from $19.00), ahead of the company's oral arguments next week in front of the Fifth Circuit Court of Appeals. Stifel believes that the key issue to be considered by the appellate court is the materiality of the undisclosed design changes, which must be proven for the FCA judgment to stand.
Analyst Michael Baudendistel commented, "The United States Court of Appeals for the Fifth Circuit will hear oral arguments next week in Trinity’s appeal of the prior judgement against the company in the False Claims Act (FCA) complaint filed by Joshua Harman in U.S. District Court. The original jury verdict in this case was issued in October 2014, with the final judgement against Trinity of $682 million entered in June 2015. Trinity has maintained throughout that the District Court erred in its handling of the original case and that its prospects for successful appeal were strong. In this note, we give our perspective after reviewing the roughly 500 pages of briefs filed with the appellate court. In short, we believe Trinity has a reasonable chance of successfully appealing the original verdict. We do not believe the market is pricing in a high likelihood of appeal and, as such, we see asymmetric upside potential for the stock over the near term as a full reversal of the prior judgement would likely be worth ~10-15% to the stock, while the incremental downside if the appellate court were to maintain the lower court’s judgement is likely minimal."
Shares of Trinity Industries closed at $26.96 yesterday.
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