Trinity: ‘Strong Performance’ in 1Q24

Written by Marybeth Luczak, Executive Editor

In the three months ending March 31, 2024, Trinity’s Rail Products Group delivered 4,695 railcars; received orders for 1,880 railcars, valued at $259.5 million; and had a backlog value of $2.9 billion. (Trinity Photograph)

“We are pleased with the progress exhibited in Trinity Industries’ first quarter results,” Jean Savage, President and CEO of the railcar manufacturer and lessor said during a May 1 financial report. “Our results show strong performance in both segments of our business, demonstrating the strength of our platform.”

Trinity reported total company revenue of $809.6 million for the three months ending March 31, 2024, up 26% from the prior-year period’s $641.7 million. It attributed this to “higher external deliveries in the Rail Products Group, and improved lease rates and a higher volume of external repairs in the Leasing Group.” Additionally, both quarterly income from continuing operations per common diluted share (EPS) and adjusted EPS came in at $0.33, with a $0.26 improvement in adjusted EPS year-over-year.

Operating profit for first-quarter 2024 was $ 115.2 million, up 67% from first-quarter 2023’s $69.0 million, reflecting “higher external deliveries in the Rail Products Group and improved lease rates and a higher volume of external repairs in the Leasing Group, partially offset by lower lease portfolio sales volume,” Trinity said.

Rail Products Group revenue came in at $667.4 million in first-quarter 2024, rising 14% from $587.6 million in 2023. The company said this reflects higher deliveries. In the three months ending March 31, 2024, the Group delivered 4,695 railcars; received orders for 1,880 railcars, valued at $259.5 million; and had a backlog value of $2.9 billion. This compares with first-quarter 2023’s 4,045 railcars delivered; 2,690 railcars ordered, valued at $300.8 million; and a backlog value of $3.7 billion. According to Trinity, 2024 deliveries include “virtually all of the railcars impacted by the Q4 2023 U.S.-Mexico border closure and congestion.”

“In the Rail Products Group, we saw revenues up 14% and operating profit up 82% year-over-year driven by higher deliveries and significantly improved operational and labor efficiencies,” Savage said.

For the Railcar Leasing and Management Services Group, revenue was $285.2 million in first-quarter 2024, up 22% from the prior-year period’s $232.9 million. The company attributed this to “higher volume of repairs completed for third parties, improved lease rates, and net additions to the lease fleet.” Lease fleet utilization—including wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements—came in at 97.5% vs. first-quarter 2023’s 98.2%. The Future Lease Rate Differential (FLRD) was positive 34.7% at the end of first-quarter 2024 vs. positive 44.3% for the prior-year period due to “continued strength in current lease rates.” According to Trinity, FLRD calculates the “implied change in lease rates for railcar leases expiring over the next four quarters” and “assumes that these expiring leases will be renewed at the most recent quarterly transacted lease rates for each railcar type”; FLRD is “useful to both management and investors as it provides insight into the near-term trend in lease rates.”

Savage reported that Trinity expects “to continue to see growth as we re-price the lease fleet upward,” and noted that first-quarter FLRD represents “a significant lift in market rates over expiring rates.”

2024 Guidance

Looking ahead, Trinity reported that it expects industry deliveries of approximately 40,000 railcars in 2024. Additionally, this year it would have a net investment in the lease fleet of $300 million to $400 million; operating and administrative capital expenditures of $50 million to $60 million; and EPS of $1.35 to $1.55, which “excludes items outside of our core business operations.”

“Our first quarter performance shows the momentum starting to flow through our business, resulting in better operations and stronger financial results,” Savage said. “This gives us confidence in our 2024 performance, and we are raising our EPS guidance to a range of $1.35 to $1.55. Furthermore, we look forward to our Investor Day on June 25, where we will share the evolution of our strategy and update our long-term targets.”