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What's in Store for Trinity (TRN) This Earnings Season?

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Trinity Industries, Inc. (TRN - Free Report) is slated to release fourth-quarter 2018 results on Feb 20, after market close.

In the third quarter, the company delivered disappointing results, with earnings and revenues missing the Zacks Consensus Estimate. Also, the top line declined year over year due to weak performances in the Energy Equipment and Railcar Leasing as well as Management Services units.

However, the situation is anything but encouraging ahead of the fourth-quarter 2018 release. Shares of the company have plunged 44.1% in the October-December period.

Factors at Play

We expect that disappointing performances in the company’s key divisions are likely to dent top-line results in the fourth quarter of 2018. The Zacks Consensus Estimate for fourth-quarter 2018 revenues is pegged at $673 million, indicating a decline from $906 million in the prior-year quarter.

Weak revenues in the Energy Equipment Group and Rail Group are expected to dent the top line in the to-be-reported quarter. The consensus mark for fourth-quarter revenues in the Energy Equipment group is pegged at $19.20 million, showing a fall from $235 million in the prior-year quarter. Also, the consensus mark for revenues in the Rail Group, which contributes majorly to the top line, is pegged at $570 million. The figure indicates a decline from $647 million in the prior-year quarter.

However, the Zacks Consensus Estimate for revenues in the Railcar Leasing and Management Services Group is pegged at $213 million, showing a rise from $197 million reported in the prior-year quarter.

We are concerned about production inefficiencies related to changes in the mix of railcars manufactured, which are expected to hurt margins and dent bottom-line results in the to-be-reported quarter. The consensus mark for fourth-quarter 2018 earnings per share is pegged at 29 cents, showing a fall from 43 cents reported in the prior-year quarter.

Nevertheless, Trinity does not have a highly leveraged balance sheet, reflected by the fact that the ratio of its debt-equity ratio (expressed as a percentage) compares favorably with the industry's figure.

Trinity Industries, Inc. Price and EPS Surprise

 

Trinity Industries, Inc. Price and EPS Surprise | Trinity Industries, Inc. Quote

 

Earning Whispers

Our proven model does not indicate earnings beat for Trinity this quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as elaborated below.

Zacks Rank: Trinity carries a Zacks Rank #3.

Earnings ESP: Trinity has an Earnings ESP of 0.00%. The Most Accurate Estimate is at 29 cents per share, in line with the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Investors interested in the Zacks Transportation sector may check the following companies that have the right combination of elements to beat estimates in their upcoming releases:

Azul S.A. (AZUL - Free Report) has an Earnings ESP of +8.16% and a Zacks Rank #1.  The company will release fourth-quarter 2018 results on Mar 14. You can see the complete list of today’s Zacks #1 Rank stocks here.

Frontline Ltd. (FRO - Free Report) has an Earnings ESP of +4.17% and a Zacks Rank #1. The company will release fourth-quarter 2018 results on Feb 28.

GOL Linhas Aéreas Inteligentes S.A. has an Earnings ESP of +17.07% and a Zacks Rank #3. The company will release fourth-quarter 2018 results on Feb 28.

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