Trinity 2Q22: ‘Improvement and Momentum’

Written by William C. Vantuono, Editor-in-Chief
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“We saw the value of our rail platform this quarter with strong railcar deliveries for our lease fleet while creating additional value through RIV and secondary market transactions.” – E. Jean Savage, President and CEO of Trinity Industries

Trinity Industries on July 27 reported second-quarter 2022 GAAP and adjusted earnings that “reflect improvement and momentum and reinforce our optimism for the back half of the year,” according to President and CEO Jean Savage.

Trinity reported quarterly total company revenues of $417 million and income from continuing operations per common diluted share (EPS) of $0.14. The company’s lease fleet utilization of 97.2% and Future Lease Rate Differential (FLRD) had increased 14.7% at quarter end. New railcar orders of 4,335 and railcar deliveries of 2,510 represented a book-to-bill ratio of 1.7x. The year-to-date cash flow from continuing operations was a net use of $61 million, and total free cash flow after investments and dividends was $43 million.

Trinity’s 2022 guidance for the remainder of 2022 is based on industry deliveries of 40,000 to 50,000 railcars; net investment in the lease fleet of $425 million to $475 million, down from $450 million to $550 million compared to 2021, manufacturing capital expenditures of $35 million to $45 million; and EPS of $0.90 to $1.10, up from $0.85 to $1.05. This excludes gains on insurance recoveries and other items outside of core business operations.

“Trinity’s second quarter results reflect improvement and momentum and reinforce our optimism for the back half of the year,” said Trinity  Chief Executive Officer and President Jean Savage. “The strength of our backlog, as well as rising lease rates and fleet utilization, are especially encouraging and provide visibility into our expectations for the full year.

“In the Railcar Leasing and Management Services Group, our Future Lease Rate Differential improved to 14.7%, which we continue to view as a leading indicator of revenue growth. Furthermore, our lease fleet utilization improved sequentially and year over year to 97.2%. We saw the value of our rail platform this quarter with strong railcar deliveries for our lease fleet while creating additional value through RIV and secondary market transactions. While supply chain and labor issues persist, we completed a successful quarter in a challenging operating environment. We continue to feel confident about the second half of the year and expect to see strengthening results across our business.”

THE COWEN INSIGHT

“The quarter was a revenue and EPS miss compared to our and consensus estimates,” said Cowen and Company Transportation Equipment Analyst Matt Elkott. “EPS was 20% below our estimate and 10% below consensus estimate. Low and high end EPS guidance has been raised to $0.90-$1.10. Lease rate indicators are positive. Manufacturing orders were solid but somewhat below our estimates.”

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