Here's Why You Must Steer Clear Of Trinity (TRN) Stock Now
Zacks Investment Research | Dec 03, 2018 08:54PM ET
Trinity Industries (NYSE:TRN) has been struggling lately due to a setback in its primary revenue generating segment, the Rail Group. The segment’s railcar-related pricing pressure is concerning. Additionally, production inefficiencies pertaining to changes in the mix of railcars manufactured are hurting margins. Oversupply conditions in the North American railcar market further add to the company’s woes. The segment’s dismal performance can be traced from its operating profit plunging 34.9% year over year during the third quarter of 2018.
Apart from the primary division, key divisions like Energy Equipment plus Railcar Leasing and Management Services have shown dwindling performances so far in the year. While revenues at the Energy Equipment unit decreased 13% in the first nine months of 2018, the same declined 5.1% at the Railcar Leasing and Management Services. Moreover, lease rates remain below the expiring leases, even though it is believed to have risen since the recent drop.
Further, the company’s trailing 12-month return on equity (ROE) undermines its growth potential. Not only has the company’s 5.4% ROE gradually deteriorated over the past year, it compares unfavorably with the industry’s average of 9.4%. This indicates that the company is less efficient in using shareholders’ funds.
Due to these headwinds, shares of the company have lost more than 34% in a year, wider than the Original post
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