Shares of railcar maker Trinity Industries (TRN) are plunging after the company issued guidance for fiscal year 2016 that was well below analysts’ expectations.
WHAT’S NEW: Trinity manufacturers products and services for the energy, transportation, chemical, and construction sectors in the United States and internationally. Most notably, Trinity is a major supplier of tanker cars for the oil industry. For the fourth quarter, Trinity reported a profit of $200M, or $1.30 per share, up from $138.2M, or 86c per share, in the year-ago quarter. Analysts were expecting $1.09 for Q4 EPS. The company booked revenue of $1.55B in the quarter, against analysts’ expectations of $1.6B. However, the company’s profit outlook for FY16 fell well short of analysts’ expectations, sending shares down almost 25% in Friday trading. Trinity said it expects FY16 EPS to be $2.00-$2.40, while analysts’ were expecting $3.64. Chief Executive Officer Timothy Wallace commented that the company’s 2016 outlook “reflects the weakening in the industrial economy that began broadly impacting our businesses late last summer. In this environment, we are placing a high priority on cost containment and various initiatives to enhance our performance. We will continue to reposition and streamline our manufacturing operations as business conditions fluctuate.”
ANALYSTS’ VIEWS: On Thursday, ahead of Trinity’s Q4 report, research firm Axiom initiated Trinity with a sell rating and $10 price target. Following the Q4 report, BB&T analyst Thomas Albrecht downgraded Trinity Industries two notches to Underweight from Buy. The analyst expected a decline in Trinity’s earnings outlook but not 2016 guidance in the range of $2.00-$2.40. Albrecht estimates tangible book value at $19.35 could attract some value investors, but outside of an oil rally, does no see any catalysts to change the earnings outlook.
PRICE ACTION: Shares of Trinity are at a three-year low and are down 24% to $16.18 in afternoon trading.
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