Trinity Industries (TRN - Free Report) has been struggling lately due to a setback in its primary revenue generating segment, the Rail Group. The segment’s railcar-related pricing pressure is concerning. Additionally, production inefficiencies pertaining to changes in the mix of railcars manufactured are hurting margins. Oversupply conditions in the North American railcar market further add to the company’s woes. The segment’s dismal performance can be traced from its operating profit plunging 34.9% year over year during the third quarter of 2018.
Apart from the primary division, key divisions like Energy Equipment plus Railcar Leasing and Management Services have shown dwindling performances so far in the year. While revenues at the Energy Equipment unit decreased 13% in the first nine months of 2018, the same declined 5.1% at the Railcar Leasing and Management Services. Moreover, lease rates remain below the expiring leases, even though it is believed to have risen since the recent drop.
Further, the company’s trailing 12-month return on equity (ROE) undermines its growth potential. Not only has the company’s 5.4% ROE gradually deteriorated over the past year, it compares unfavorably with the industry’s average of 9.4%. This indicates that the company is less efficient in using shareholders’ funds.
Due to these headwinds, shares of the company have lost more than 34% in a year, wider than the industry’s 7.4% decline.
One Year Price Performance
The negative sentiment surrounding the stock is further evident from the Zacks Consensus Estimate for current-quarter earnings being revised 29.3% downward over the last 60 days. Also, the same for full-year earnings has been trimmed approximately 30.7% over the given time frame. To top it all, the company has a VGM Score of F. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three factors.
The company’s Zacks Rank #5 (Strong Sell) clearly underlines our view that investors should get rid of this stock from their portfolios now.
Some better-ranked stocks in the broader Transportation sector are Air France-KLM (AFLYY - Free Report) , CSX Corporation (CSX - Free Report) and Norfolk Southern Corporation (NSC - Free Report) . While Air France-KLM and CSX sport a Zacks Rank #1 (Strong Buy), Norfolk Southern holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Air France-KLM, CSX and Norfolk Southern have rallied more than 35%, 13% and 14%, respectively, in the past six months.
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