Why Trinity Industries Shares Are Falling Today

Trinity Industries Inc TRN reported Q2 FY23 revenue growth of 73% Y/Y to $722.4 million, beating the consensus of $613.9 million.

Adjusted EPS improved 64% Y/Y to $0.23, missing the consensus of $0.33.

Operating profit increased to $99.1 million from $73.0 million a year ago, led by higher external deliveries in the Rail Products Group and improved lease rates in the Leasing Group.

Adjusted EBITDA increased to $173.2 million from $144.2 million the prior year.

As of June 30, 2023, Trinity Industries' operating cash flow – continuing operations was $140.3 million, compared to a negative $(61.3) million the prior year.

Trinity Industries had liquidity of $699 million as of June 30, 2023. It held cash and equivalents of $91.7 million.

Lease fleet utilization of 97.9% and Future Lease Rate Differential of positive 29.5% at quarter end.

New railcar orders were 4,770 (vs. 4,335 in Q2 2022), and railcar deliveries were 4,985 (vs 2,510 a year ago). The backlog stood at $3.6 billion at quarter-end.

FY23 Outlook: Trinity Industries expects EPS of $1.35-$1.45 (down from the prior $1.50-$1.70) versus the consensus of $1.51.

It expects Industry deliveries of around 45,000 (prior 40,000-45,000) railcars and a net investment in the lease fleet of $250 million - $350 million.

"We expect positive industry trends to continue in the back half of the year, with lease rate growth and consistent railcar deliveries driving up revenue. Additionally, while we expect marked margin improvement in the second half of the year, this will be partially offset by the strength of the Mexican peso, higher interest expense, and slower recovery than expected in efficiency and supply chain," said Jean Savage, CEO and President.

Price Action: TRN shares are trading lower by 8.43% at $24.01 on the last check Tuesday.

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