Revenue, Margin Improvement Expected in 2023, Says Trinity’s Savage

Written by Marybeth Luczak, Executive Editor
Trinity Industries President and CEO Jean Savage

Trinity Industries President and CEO Jean Savage

At Trinity Industries, the Railcar Leasing and Management Services Group continues to see “lease rate improvement and strong utilization,” and the Rail Products Group “again faced labor and supply chain challenges, impacting deliveries and margins,” President and CEO Jean Savage reported during a fourth-quarter and full-year 2022 earnings announcement on Feb. 21.

Trinity reported total company revenues of $591.2 million for the three months ending Dec. 31, 2022, up 25.20% from the prior-year period’s $472.2 million. For full-year 2022, revenues were $1.977 billion, rising 30.41% from 2021’s $1.516 billion. The company attributed both increases to “higher volume of external deliveries and improved pricing in the Rail Products Group.”

Rail Products Group revenues came in at $655.7 million in fourth-quarter 2022, up 63.07% from $402.1 million in 2021. Trinity said this reflects a “higher volume of deliveries and favorable pricing and product mix.” In the three months ended Dec. 31, 2022, the Group delivered 4,400 railcars; received orders for 3,015 railcars, valued at $350.8 million; and had a backlog value of $3.903 billion. This compares with fourth-quarter 2021’s 2,805 railcars delivered; 5,360 railcars ordered, valued at $597.7 million; and a backlog value of $1.517 billion.

For the Railcar Leasing and Management Services Group, revenues were $197.4 million, up 8.94% from fourth-quarter 2021’s $181.2 million. The company attributed this to “net lease fleet investment activities, higher utilization and improved renewal rates.” Fleet utilization came in at 97.9% in fourth-quarter 2022 vs. 95.7% in the prior-year period.

Among Trinity’s other financial and operational highlights:

For fourth-quarter 2022:

  • Quarterly income from continuing operations per common diluted share (EPS) was $0.46; quarterly adjusted EPS was $0.44.
  • Future Lease Rate Differential (FLRD) was positive 25.1% at year-end, “showing the strength in current lease rates,” said Jean Savage, who noted that the company’s fleet utilization of 97.9% “supports our positive views on the railcar leasing market.”
  • Trinity in December 2022 acquired Holden America, a manufacturer of multi-level vehicle securement and protection systems, gravity-outlet gates, and gate accessories for freight rail in North America, “for an initial cash payment of $71 million, with minimum additional consideration of $10 million, payable in installments of $5 million per year for the next two years.”

For full-year 2022:

  • Reported EPS was $1.02. Adjusted EPS was $0.94, “up 176% over 2021 despite unexpected headwinds in 2022,” according to Savage.
  • Full-year cash flow from continuing operations and adjusted free cash flow after investments and dividends (Adjusted Free Cash Flow) were $9 million and $138 million, respectively.
  • Trinity completed a $254 million railcar sale to Wafra Inc. in third-quarter 2022, and recorded a gain of $25 million.

2023 Outlook

Trinity offered the following guidance for this year:

  • Industry deliveries of 40,000-45,000 railcars.
  • Net investment in the lease fleet of $250 million-$350 million.
  • Manufacturing capital expenditures of $40 million-$50 million.
  • EPS of $1.50-$1.70, which the company said “excludes items outside of our core business operations.”

“With market conditions normalizing, combined with a steady run rate of deliveries, we expect both revenue and margin improvement in 2023,” Savage said. “I’m proud of our employees’ ability to execute in an unpredictable year, and I look forward to sharing our continued progress with you in 2023.”

More details can be found on the Trinity Industries Investor Relations site.

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