This week’s Stock of the Week is a strong company in an industry that’s been in a downturn, but is ready for a rebound, which is why it’s a good bargain right now.
Riding the Cycles
Trinity Industries Inc. (TRN) is a leading maker of railcars, axles and coupling devices as well as wind towers and storage-and-distribution systems—cyclical fields that should bottom out this year and begin to recover next year. The opportunity for investors is now, before that recovery leads to higher share prices.
Trinity also is a leader in railcar leasing and management services. After a series of record years starting in 2013, Trinity was slammed by the downturn in energy prices plus a glut in railcars, of which there now is an oversupply. But the firm has a strong balance sheet with $2 billion in cash—plenty for share buybacks. It repurchased 1% of its shares in the past year and is authorized to buy back 5%. It has a backlog of $3 billion dollars for railcar building—and its wind-power business now has a $1 billion backlog.
Trinity has paid a dividend for 53 straight years—212 quarters in a row. The dividend is now $0.44/share/yr., recently yielding 1.61%. Revenue of $4.6 billion last year will likely fall to $3.7 billion this year and then move upward to $4 billion in 2018.
Fiscal year: Dec. Earnings per share: 2018 est./$1.49…2017 est./$1.24…2016/$2.17.
This Week’s Expert
Matt Watson is portfolio manager of James Advantage Funds, Xenia, Ohio, including the $4 billion James Balanced: Golden Rainbow Fund (GLRBX) and the $14 million James Mid Cap Fund (JAMDX). JamesFunds.com