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Bull Of The Day: Trinity Industries

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Trinity Industries (TRN - Free Report) just reported a solid quarter and as I write this the stock is a Zacks Rank #2 (Buy).  In my experience, I have seen several stocks that were Zacks Rank #2 (Buy) and following a strong quarter like this they bumped up to a Zacks Rank #1 (Strong Buy).  We should see just that with TRN over the next few sessions and that is why I selected it as the Bull of the Day.

Description

Trinity Industries, Inc., is a diversified industrial company that owns complementary market-leading businesses providing products and services to the energy, chemical, agriculture, transportation, and construction sectors, among others. The company, Trinity Industries, Inc., operates in five principal business segments: the Rail Group, the Railcar Leasing and Management Services Group, the Inland Barge Group, the Construction Products Group, and the Energy Equipment Group. Trinity is engaged in the manufacture, marketing, and leasing of a wide variety of products. Trinity Industries, Inc., is traded on the New York Stock Exchange under the symbol TRN. The company is headquartered in is Dallas, Texas.

Recent Earnings

The company posted earnings of $0.43 and that was $0.06 ahead of the Wall Street Consensus. Revenues were $942M and that was below the $965M estimate.

Importantly, the rail group saw revenues of $575M and that was up from $465M in the year-ago period.

The company guided FY18 to $1.45 - $1.65 when the consensus called for $1.39.

Estimates

So clearly with the guidance coming in rather strong, we are going to see estimates move higher. I am expecting the Zacks Consensus Estimate for the year to bounce higher by 15 cents or more.

We will want to see the same for next year as well. Right now, the Zacks Consensus Estimate for 2019 is $1.70, so look for that number to move higher as well.

Earnings History

I see a solid history of beats. The company has beaten in each of the last four quarters prior to the beat tonight. The average beat over that time period is just about 20%. That means this is going to be a good long-term hold.

Valuation

There is a 26x forward earnings multiple and that is a lot for a stock that is seeing lower year over year revenue growth. Price to book at 1.13x is super low, especially for a stable business that is earning cash like this. I have to say that this could become an activist stock –meaning a big player could take a large position down here and force some changes to maximize value. The price to sales of 1.5x is low, but above the 1x barrier that I really like to see.

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