Trinity Industries on Oct. 25 reported third-quarter 2022 GAAP and adjusted earnings that “show progress and improvement in our business,” according to President and CEO Jean Savage. “We continue to believe we will perform well in the coming years given our robust backlog and the favorable re-pricing environment for lease rates.”
Trinity reported total company revenues of $496.6 million for the three months ending Sept. 30, 2022, up 18.29% from the prior-year period’s $419.8 million. It attributed this to “higher volume of external deliveries and improved pricing in the Rail Product Group.” Additionally, quarterly GAAP and adjusted earnings from continuing operations were $0.35 and $0.34 per diluted share, respectively, in third-quarter 2022.
Rail Products Group revenues came in at $597.3 million in third-quarter 2022, rising 75.73% from $339.9 million in 2021. The company said this reflects a “higher volume of deliveries, favorable pricing and price escalation.” In the three months ended Sept. 30, 2022, the Group delivered 3,935 railcars, “driving book-to-bill ratio of 5.0x”; received orders for 19,500 railcars, valued at $2.4 billion, which includes a long-term supply agreement of 15,000 railcars announced earlier this month; and had a backlog value of $4.1 billion. This compares with third-quarter 2021’s 2,410 railcars delivered; 2,530 railcars ordered, valued at $218.6 million; and a backlog value of $1.2 billion.
In this Group, “we have increasing conviction in strong railcar demand persisting in 2023 based on tighter industry supply and our impressive backlog of $4.1 billion bolstered by the 15,000 multi-year railcar order received in the quarter,” said Savage. a featured speaker at Railway Age’s Rail Insights: Women in Rail Virtual Conference, to be held Nov. 10. “Furthermore, along with increased deliveries, we reported revenue and margin growth again this quarter, indicating our momentum in an improving market and pricing environment for railcars.”
For the Railcar Leasing and Management Services Group, revenues were $194.8 million in third-quarter 2022, up 5.01% from third-quarter 2021’s $185.5 million. Fleet utilization came in at 97.9% in third-quarter 2022 vs. 95.0% in the prior-year period.
In this Group, “our Future Lease Rate Differential remained strong at 11.0% and utilization improved to 97.9%, setting up revenue growth in coming quarters,” Savage said. “We completed our second portfolio sale to Wafra in the quarter, and this transaction reinforced our view of railcar investment vehicles as a dynamic platform to originate leases that are attractive to the market while moderating our fleet investment.”
Trinity reported a $254 million railcar sale to global alternative investment manager Wafra Inc. in the quarter and recorded a gain of $25 million. Trinity and Wafra in August 2021 teamed on a new program that will invest in “diversified portfolios of leased railcars originated by Trinity Industries Leasing Company.”
Trinity offered the following guidance for this year:
- Industry deliveries of 40,000 to 50,000 railcars.
- Net investment in the lease fleet of $250 million to $300 million.
- Manufacturing capital expenditures of $35 million to $45 million.
- EPS of $0.90 to $1.10, which “excludes gains on insurance recoveries and other items outside of our core business operations,” according to Trinity.
“We continue to be enthusiastic about our business, and expect a solid fourth quarter to close the year with strong momentum and visibility for 2023,” Savage concluded.
Cowen Insight: ‘Slight Beat; Guidance Maintained’
“The quarter was a revenue miss but a slight EPS beat,” Cowen and Company Freight Transportation Equipment Analyst Matt Elkott reported. “Manufacturing margin was largely in line with our estimate. The large order reflects the previously announced GATX supply agreement. Orders were fairly solid excluding that. Lease rate indicators remain positive. Demand conditions remain favorable. Outlook for net investment in lease fleet reduced again for the year.”