Market Overview

Gordon Johnson: Sell Trinity As 'Rear-View Catalysts' Fade

Gordon Johnson: Sell Trinity As 'Rear-View Catalysts' Fade
Related TRN
66 Biggest Movers From Yesterday
60 Stocks Moving In Thursday's Mid-Day Session
Daily Insider Ratings Round Up 12/10/18 (Seeking Alpha)

The Street had only good things to say about Trinity Industries Inc (NYSE: TRN).

That is, until Tuesday. The rail company earned its only bearish rating diluting seven Buys.

The Rating

Vertical Group analyst Gordon Johnson initiated coverage on Trinity Industries with a Sell rating and $20 price target.

The Thesis

Trinity is up nearly 25 percent year-over-year, but Johnson attributes that to a reversal in a previously negative trial verdict; a rally in oil prices; the company’s pending split into rail and infrastructure businesses; positive sentiment around corporate tax reform and infrastructure plans; and intended use of capital toward share repurchases, dividends and mergers.

But these “rear-view catalysts” do little to buffer margin headwinds, the analyst said. 

“We believe the U.S. rail leasing industry faces a structural problem of excessive railcar production against a backdrop of ‘struggling’ car loadings,” Johnson said in the initiation note. 

Trinity’s guidance for margins declines, coupled with improvement in its lower-margin third-party managed fleet segment, reinforced Johnson’s bearishness. By his assessment, Trinity margins have not troughed as other analysts have suggested.

Looking forward, Johnson said he expects continuing flat demand to pressure leasing rates and challenge Trinity’s ability to sell railcars to external entities.

Price Action

Trinity Industries shares were up 0.48 percent at $33.70 after the open Tuesday. 

Related Links:

Canadian Pacific To Chug Along On Cash, Crude Catalysts

The Railroad Trade: The Transport Stock Most Likely To Stay On Track

Latest Ratings for TRN

Nov 2018Wells FargoMaintainsOutperformOutperform
Oct 2018BuckinghamMaintainsBuyBuy
Oct 2018Stifel NicolausMaintainsBuyBuy

View More Analyst Ratings for TRN
View the Latest Analyst Ratings

Posted-In: Gordon Johnson rail transportation Vertical GroupAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga


Related Articles (TRN)

View Comments and Join the Discussion!

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Benzinga's Top Upgrades, Downgrades For March 6, 2018

GBP/USD Forecast: 1.39 Handle Likely To Cap Any Further Up-move