UPDATE: Trinity Industries (TRN) Tops Q4 EPS by 4c, Revenues Beat; Provides FY20 EPS Guidance Above Consensus

(Updated - February 19, 2020 4:25 PM EST)

Trinity Industries (NYSE: TRN) reported Q4 EPS of $0.0.35, $0.04 better than the analyst estimate of $0.31. Revenue for the quarter came in at $850.7 million versus the consensus estimate of $807.6 million.

Financial and Operational Highlights — Fourth Quarter 2019:

• Quarterly total company revenues of $850.7 million, reflecting growth of 15.7% year over year
• Quarterly earnings from continuing operations per common diluted share (\"EPS\") of $0.18, a decrease of 5% year over year
  • Adjusted EPS increased 35% year over year to $0.35 and excludes $0.09 per share related to restructuring activities and $0.08 per share related to the effects of a one-time, non-cash, deferred tax impact related to planned expansion of our Maintenance Services operations
• Quarterly revenues from leasing and management services of $189.9 million with a 42.2% operating profit margin
• Growth of the wholly-owned and partially-owned lease fleet to 103,705 units, with lease fleet utilization of 96.0% at quarter-end
• Rail Products Group quarterly revenues of $887.6 million and an 11.0% operating profit margin
• Rail Products Group quarterly railcar orders and deliveries of 2,585 and 6,880, respectively, resulting in total railcar backlog of $1.8 billion at quarter-end
• Repurchases of approximately 2.9 million shares at a cost of $60.8 million

“Trinity made meaningful progress in 2019 on the Company’s strategic and financial priorities in our first year as a rail-focused company,” said Melendy E. Lovett, Senior Vice President and Chief Financial Officer. “While railcar industry fundamentals declined throughout the year as a result of uncertainty in trade policy and the North American industrial economy, Trinity’s team delivered strong results in a very challenging market. Continued growth of our leased railcar portfolio, an emphasis on improving our lease rates while maintaining high utilization, and higher manufacturing railcar deliveries with a favorable product mix resulted in a 32% increase in full year operating profit year over year. Our senior leaders have made significant strides in improving operating performance and reducing our corporate costs by 28% during 2019.”

Ms. Lovett continued, “We are progressing well in the execution of our key financial priorities including lowering our cost of capital, deploying capital to return-accretive investments, and returning meaningful and steady amounts of capital to shareholders. Trinity’s Pre-Tax ROE significantly improved to 9.0% in 2019 as a result of improved profitability and substantial progress in optimizing the Company’s balance sheet. During the year, Trinity returned $376.8 million of capital to shareholders, approximately 14% of our market cap, reflecting the strength and synergies of Trinity’s rail platform and our commitment to improving shareholder value.”

“I am thrilled to officially join Trinity Industries and lead this Company into its bright and promising future,” said E. Jean Savage, newly appointed Chief Executive Officer and President. “The railcar industry is experiencing changing dynamics across the industrial end markets we serve, including increasing customer service expectations and the utilization of technology within supply chains. As a result of our rail-focused strategy, we have an opportunity to assess our business, evaluate our processes, and align our organization to deliver a premier experience for our customers based on their evolving business needs. Our results must be highly effective, highly efficient, and highly profitable for all our stakeholders to be successful - and I believe there is significant opportunity to unlock greater value at Trinity.”

Ms. Savage continued, “Trinity’s Board of Directors and Senior Leadership are fully aligned, and we have high expectations for driving the performance of the platform to new levels. Trinity’s corporate culture is built on the foundation of collaboration and commitment to excellence. I believe this organization is ready and positioned to make the needed changes toward stronger performance, and to elevate and accelerate Trinity’s position as a premier provider of railcar products and services in North America.”

GUIDANCE:

Trinity Industries sees FY2020 EPS of $1.15-$1.35, versus the consensus of $1.08. Trinity Industries sees FY2020 revenue of $2.5-2.7 billion, versus the consensus of $2.65 billion.

For the full year 2020, the Company is projecting earnings per common diluted share of between $1.15 and $1.35 and top line revenues of between $2.5 billion and $2.7 billion. Trinity’s 2020 guidance includes continued progress on its cost and balance sheet optimization initiatives, but does not include the effect of any charges or gains associated with restructuring activities, pension plan termination charges, or other items outside the normal course of our core business operations.

As a result of the new rail-focused strategy, as of early 2020, Trinity is finalizing an assessment of the estimated useful lives and salvage value assumptions for the railcars in the Company’s leased railcar portfolio. Based upon analysis of historical fleet data, a review of industry standards including those of direct leasing peers, and consideration of certain economic factors, the Company has determined that it is appropriate to revise the useful lives and salvage values of certain railcar types in our lease fleet. The net impact of these changes will be effective on January 1, 2020, and is expected to result in a change in the weighted average useful life of railcars in our lease fleet to 37 years from 34 years. Based on the composition of the lease fleet as of December 31, 2019, the Company expects annual depreciation expense to be between $27 million and $33 million lower for the year ended December 31, 2020, resulting in a favorable impact to earnings per common diluted share of approximately $0.14 to $0.18 per share.

For earnings history and earnings-related data on Trinity Industries (TRN) click here.

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