Trinity 3Q23: ‘Significantly Stronger Performance’

Written by William C. Vantuono, Editor-in-Chief
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“Trinity’s third quarter results reflect significantly stronger performance, with revenue growth of 65% as compared to a year ago.” – E. Jean Savage, President and CEO of Trinity Industries

Trinity Industries, Inc. earnings results for the third quarter ended Sept. 30, 2023 showed improvements in revenue, though railcar deliveries fell due mostly to factors the company could not control.

Quarterly total company revenues of $821 million were a 65% improvement year over year. Quarterly income from continuing operations per common diluted share (EPS) were $0.29; quarterly adjusted EPS was $0.26. Lease fleet utilization was 98.1% and FLRD (Future Lease Rate Differential) was a positive 26.6% at quarter-end. Railcar deliveries were 4,325, a 14% drop from the prior-year quarter. Trinity booked orders for 3,200 new railcar. The backlog stood at $3.6 billion at quarter-end. Year-to-date cash flow from continuing operations and adjusted free cash flow after investments and dividends (Adjusted Free Cash Flow) were $216 million and $50 million, respectively.

Trinity provided 2023 guidance based on industry deliveries of approximately 45,000 railcars: Net investment in the lease fleet of $250 million to $350 million; manufacturing capital expenditures of $40 million to $50 million, and EPS of $1.20 to $1.35. These figures excludes items outside of core business operations

“Trinity’s third quarter results reflect significantly stronger performance, with revenue growth of 65% as compared to a year ago,” stated CEO and President Jean Savage. “We believe we are on a good path to end 2023 with favorable financial performance and continued improvement. In our Railcar Leasing and Management Services Group, revenues are up 14% year over year, reflecting six quarters of beneficial re-pricing, as well as contributions from our recently acquired businesses in the segment. Our forward-looking metrics continue to point toward consistent strength in lease rates, with an FLRD of 26.6% and lease fleet utilization of 98.1%.

“As previously disclosed, deliveries in the quarter of 4,325 railcars were about 14% below our internal expectations because of the border closures and continued congestion. Despite this meaningful impact, operating margins improved in the Rail Products Group segment to 5.2%, excluding gains from insurance recoveries. We expect fourth quarter segment margins to improve sequentially again due to continued efficiency improvement and delivery growth.

“We are proud of our third quarter results and the improvement we are seeing in our business. Due to the missed deliveries in the third quarter and related supply chain and efficiency impacts caused by congestion at the Mexico border, we are lowering our full year adjusted EPS guidance to a range of $1.20 to $1.35. This guidance reflects expected meaningful growth in the fourth quarter, and we maintain our conviction in our ability to execute and close the year with solid momentum.”

“FY23 guidance was lowered to $1.20 – $1.35 from $1.35 -$1.45. The $1.28 midpoint of the new range is above the $1.12 consensus estimate. A guidance reduction was expected after TRN’s 10/3 production pre-announcement. Manufacturing margin was 200 bps higher than our forecast. Orders of 3,200 units were below our 3,800-unit estimate. FLRD 26.6% vs. 29.5% in 2Q23; utilization 98.1% vs 97.9% in 2Q23.– Matt Elkott
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