Chris Castaldo, Stock Traders Press
Stock Traders Press makes about 12 fundamental stock selections each year. Reports are published each Tuesday/ Thursday at 4PM EST. Other reports are published based on market or company specific news. All securities are updated regularly until each position is closed. 84% of Stock Traders Press picks in the past 5 years have been profitable.
Trinity Industries, Inc. (NYSE: TRN)
Trinity Industries (NYSE) TRN: $27.76
Company Data
| 52-week range | $26.26 – $49.70 |
| Market Cap | $2.26B |
| Shares Outstanding | 81.49M |
| Average Vol. | 1,551,230 |
| Book Value | $$20.28 |
| Price/Book | 1.38 |
| Target Price | $38-$39 |
| Target Percentage | 36%-40% |
Trinity Industries(TRN) is a diversified manufacturer of equipment and products to the transportation, energy and construction industries. We recommend Trinity Industries for the following reasons:
Trinity Industries is an extremely well-run company which has consistently generated good profits over the years. This has especially been true during slack economic periods.
Recently, the company reported third quarter operating results which were substantially better than expected. This was the fifth consecutive quarter where profits exceeded expectations. Despite these outstanding results, the stock of Trinity Industries has declined sharply primarily due to the company’s conservative outlook in 2008.
At the present time, the company has a backlog of 31,000 railcars valued at $2.6 billion which is equal to the backlog of $2.5 billion in September 2006. Additionally, the company’s Inland Barge Group unit has experienced strong growth of 35%. As of September 30, 2007, the Barge Group’s backlog increased to $771 million, up from $424 million.
Trinity’s Railcar Leasing unit has experienced very strong growth with profits rising about 100%. Currently, the leasing operation represents about 30% of profits which is expected to continue.
The company’s construction business division, which is about 10% of profits, showed relatively flat results. This group tends to be cyclical as business will fluctuate with the level of road construction and repairs. It is notable that the division continues to maintain its profitability during the recent sluggish highway construction and repair environment.
Currently, the company pays a dividend of $0.28 per share for a modest yield of 1% annually. We would not be surprised if the dividend is raised in the near future.
We consider the current price of $27.76 per share a very attractive purchase level for this well-run company. We are establishing an initial target price of $38 - $39.