Train Coming ‘Round the Bend: Trinity Industries (TRN)

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We love companies that have the kind of locked-in growth that Trinity now has, especially when the stock is cheap and pays a small but growing dividend. That’s not to say there aren’t risks. Railcar sales are deeply cyclical, so investors won’t pay top dollar for a company that depends on them. The company also has a moderately high debt load, which is adequately covered by its cash flow. We still see plenty of room for Trinity to grow and for the stock to run. Though the company’s profit margins are healthy, they are still short of their historical highs. That means earnings and dividends can also move significantly higher.

Sustainability Profile

Trinity has a relatively sparse social and sustainability profile, but there are a couple of issues to flag. We like that the company has exposure to wind towers, though we remain concerned about siting of wind farms in environmentally pristine and sensitive areas (Trinity has no say in where its towers are installed). The company is involved in producing and leasing railcars and tankers, many of which are used to transport fossil fuels. But on the flip side, the environmental positives of rail transport are compelling, as freight trains are over four times as energy efficient as the highest-efficiency trucks. According to The Energy Collective, shifting 25% of U.S. truck transport to rail would result in a cut in carbon emissions equivalent to doubling the total wind and solar energy capacity in the U.S. Trinity is the unique company that will benefit from both those trends.

Revenues:            $3.8 Billion
2014E                     $4.72
2013E                     $4.31
2012A                     $3.19

Projected Annual Growth Rate: 10%
Dividend: 1.2%
52-Week High–Low: $45.67–$27.56
Risk: Moderate