Trinity Industries (TRN) 31 Oct 242024 Q3 Earnings call transcript

Good day, and welcome to the Trinity Industries Third Quarter Ended September 30, 2024 Results Conference Call. [Operator Instructions] Please note, this event is being recorded.

Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to estimates, expectations, intentions and predictions of future financial performance. Statements that are not historical facts are forward-looking. Participants are directed to Trinity's Form 10-K and other SEC filings for a description of certain of the business issues and risks, a change in any of which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.

to President, conference Investor like Anne to now Vice Mann, Relations. would turn over the Leigh I Please go ahead.

XXXX call. Thank you, for quarter us appreciate you results operator. Good morning, the everyone. company's We joining financial conference third

Chief Our prepared comments company's and include remarks the and Marchetto, Financial Executive Savage, Eric from President; Chief Officer Jean will Trinity's Officer.

hold our leaders. a session the following Q&A will We prepared from remarks

third are The provided will our earnings reconciliations call today, www.trin.net. the are During we reference comparable of the certain quarter under GAAP financial which to the & slides These the measures the of conference Investor of the Presentations metrics. in non-GAAP appendix the link. at slides, quarterly portion event metrics call along non-GAAP website, are Events Relations investor website on accessible with

on of XX:XX be on today's through Events & will Eastern Presentations Time website. available the our November Relations call XXXX. replay under available X, page a.m. A after Investor Replay is information midnight

my It call pleasure over is to now Jean. to the turn

you, business. everyone. again across Anne, performance third strong demonstrate quarter results our once Thank good Trinity's and morning, Leigh

Our has quarterly compared by of adjusted the $X.XX to risen year. previous XX% and operating represents increase a year-over-year, EPS profit $X.XX

provide and results a range quarter. continue of $X.XX consistent These steady details year prepared $X.XX. expect to fourth guidance more raising will remarks. full on in EPS we his throughout by are and we impressive are in XXXX, which driven Consequently, quarter performance fourth progress to the tightening expectations Eric our to

year, third end our Carloads deliveries roughly chemical X months compared primarily XXXX. the previous quarter increased industry I'd we Before the of the the third talking just as market provide the current in year, in Trinity's conditions. like an to in in XX,XXX With the to forecast confident by driven and are of quarter agriculture results, segment markets. of about remaining overview

to expect this crop a contributing also which harvest, carload soybean We and growth. is large corn

this service have supply encourage XXXX. to been to it And railroad service continues improvements chain positively. and expansion of their trend incorporate Rail shipments sustain management. in should key in in Late type themes performance, railroads rail the more shippers as

pivot of which services logistics Trinity's segments: comments Leasing services And Products and my main better the lower has the segment, the move our and the third consists includes and business resulted businesses. businesses let's to Group. business with performance like I'll This quarter. costs. with X maintenance Services we the leasing segment. our Railcar in and in now our and note into Group of aligning performance are Rail in particularly the of to I'd same that leasing maintenance pleased leasing, benefits the start

year, as For improved additions the a net approximately segment, as by favorable to the to of and the well driven by volume XX% and compared revenues external increased repairs previous fleet. rates lease lease higher pricing

Additionally, guidance. segment quarter, including operating ago. gains, operating profit forecasted was the our margin, is XX% Segment in aligns with higher than which a XX.X% year

utilization for Fleet favorable quarter. at remains the XX.X%

rate. quarter the in anticipate a the concluding observed with an utilization utilization so have improvement year fourth higher in We far and

$XX million. lease million of of gains sales in resulting in $XX completed We portfolio quarter, the

quarterly $XX was $XX invested fleet. we Our net in our million fleet million, and investment year-to-date, lease have

quarters rate for quarter, was lease or the marking positive consecutive future differential, FLRD, FLRD. The XX.X% XX double-digit of

top is fleet, XX XX% our of and line quarters, results. the our of repricing have in becoming more repriced evident these During impact we the

supporting remains to in consistently North as balance, American fleet expect we these and fleet this repricing to continue trend our rates. rates market We upward the are

are supportive rates. of was high The for market renewal success railcar rate lease the quarter, and end highlighting remains XX% that demand higher economics

offerings, service are by progress making. continue As are the expand encouraged our to we we we

bring services with are traction recognize efficiency. they gaining to our the our as value efforts their customers Our operational

segment. Products Rail Moving to the

operating quarter the of efficiencies segment year-over-year third were $XXX and Revenues in mix. million. reflects margin in and labor favorable improvement X.X% railcar operational Our

car still toward observed we shift though deliveries, quarter, cars. production slight continues to led a This tank by be freight significantly

our more trends these to to We the fleet compared into we our production the as second quarter. quarter. of we as Additionally, continue expected, fourth shifted anticipate in

We expect to of range finish Products an end in X% the the in the high margin forecasted segment. year with of Rail X% to operating the

X,XXX saw deferring of fourth new quarter. During order railcars successfully the $X.X decisions their a third quarter to backlog billion. we railcar we orders, quarter, In delivered new with several X,XXX customers and the ending the the received quarter,

to result, we a date. strong As experiencing are in quarter fourth the activity order

tack-on orders orders. with Additionally, customers their expanding are existing

In our throughout this business conclusion, performance pleased quarter XXXX. and I'm with

remainder favorably, continues statements business maintenance will production leasing parts year. operation, supports that owned for network of Our and of now and efficient business railcars. I the outlook services more Eric growing financial and bolstered to a robust fleet and the a operate managed the and our by to our to an XXX,XXX to consistently update discuss turn a provide

This In good operations quarter, the consistent adjusted managing to our approach net ROE range last disciplined our with XX.X%, strong Investor everyone. a our Jean, in balanced you, morning, third driving Day Thank and June. reflects at was our balance target above XX-month sheet. introduced income,

of pricing this my million. were favorable slightly maintenance and offset work, will of sequentially of was begin improved mix railcar both mix lease the a favorable fleet I and but partially the year-over-year, by In income quarter, with External growth comments and we deliveries. revenues lower, rates, statement. $XXX quarterly earned deliveries

positive adjusted our was was Quarterly position. GAAP and sheet on outlook EPS balance EPS a maintain $X.XX. We $X.XX,

Our loan-to-value XX.X%, target to our stands range ratio at within of XX% XX%.

cost to to of cost spread from XXXX. next our over reprice as capital scheduled strategic we late us a benefit debt of increase Additionally, our we continue positioning assets. leased This average the maturity for allows debt, our with favorable

million, have ability of to flow million shareholders. reflecting significant returned continuing flow Trinity's have and we Year-to-date, Moving capital million. to returning through our cash flow $XXX in dividends the share commitment generate we to statement. evident and Year-to-date XXXX currently our cash $XX repurchases, cash performance. liquidity is operations $XXX to was cash from paid

million We And fleet Year-to-date, million favorable continue use This we business returns. believe capitalized out our to improve secondary market includes active secondary added its modifications of taken the have in cash $XXX market railcars we that we have under composition. additions the sale our have fleet We a fleet. our optimize our an secondary advantage fleet. our is our builds, and the to second buyer to of seller remain $XXX Conversely, of RIV those a and we sold to and to strong market our of optimize management. optimization in million new and as believe to quarter investment railcar on lease best in lease of $XXX remain a and market, partner. have conditions

remarks expectations of for my conclude I our the quarter will the last with year.

we mentioned, industry of Jean As approximately deliveries XX,XXX expect in railcars XXXX.

million Given investment, to the our by my investment $XXX -- fleet $XXX to $XXX lowering year for on fleet million. are we net a the prior guidance comments million for range net of range

The $XX in prior sales, than secondary Consequently, from full we initially and strong of year proven million has about million. year lease expected, up end approximately on returns realized we secondary $XX expect from portfolio the with gains attractive our more market to expectation market sales.

to in fleet, Some of over due $X interest. our minority owned to partially the minority rate. result third these will come million the about secondary of interest which We to run elimination quarter gains sales impact be from market anticipate

about to of lease XX% year, continue deliveries fleet implies in We our XX% go for to quarter. full expect higher into railcar to fourth eliminations new the our which the

to $XX capital operating and remains administrative outlook million at expenditures Our $XX unchanged for million.

We ramped is Finally, of expectations Group higher-than-expected XXXX with X our consistently $X.XX initially of projected. favorable in, year on $X.XX operating which due of raising labor sales gains work, mix with to guidance improvement operational a We enhanced ending to operations EPS leasing Products our this from In the year of and This introduced and our results maintenance we guidance core $X.XX. guidance. $X.XX being February, has exceeded business. margins, are we tightening than months EPS anticipate railcar our now performing current more to to continuing midpoint attributed initial higher of efficiencies, well a with Rail starting $X.XX. the and

lines In a note. time. year-end to call expect XXXX positive and at across in pleased our summary, during favorable guidance February and business that you we driven our forward updating are conclude on to XXXX outcomes look for We to have of providing

Operator, now take question. are first we to ready our

first Instructions] [Operator with The question comes Bascome from Majors Susquehanna.

range. the the which guidance year fourth Was margin the that that you full above to OEM to that gave, suggesting the close at your quarter? of at the On end talked specific believe, Or would X% I would higher maybe your margin be X%, was about, imply quarter? fourth in you year ending

high about the range talking the end of year. for We're

that X% in the be X% will So it to closer and X%. to

could above could fall in the how mean could put than in year you quarter, I you would that earlier forward Can Investor Investor margin through you've we suggested And where that of can't thought you've margin you, Okay. Day. fourth lifted X% that, maybe be set for this cost before year and we you continues a what the mix, things rates, to side And the it that production XXXX? on pull move risk, shared see your suggest next range maybe sort to walk faster at for Day? the it the from X% bit range little to back other your that out that

Sure.

done has operating great you So getting a and efficiency up. the at the job team efficiency first, look labor when it,

that Some Other help -- fixtures experienced, setup and over with time are through work cars more -- families a occur much during things lessen so is has us year. just getting done that. of of a to they've we're workforce the to plant getting things go the on is the that

lead so employees, tends before, lot of efficiencies. to which had lower younger a to we And

of all a that cars, within of going will or how So setups you're also do mix within plays a in it and many affect the quarter those. month that to into

in number term So depending won't be depending that we're mix, It vary. doing you're will a see, on to going linear number that in that frame. time the setups of or the on you

month the for some management but growing mean that book-to-bill this in you I you sit what's manufacturing into remain necessarily much in be -- to quarter? production X you rate and will slippage to are at around did the the sorry, orders mean And order side. there of a stronger. I But the backlog schedule doesn't also the production do on the going quarter current question if where last be to strong managing think another guys a the -- you strategy today quarter XQ they support you the from quarter was stable And that orders enough rate support industry? below said have orders,

Bascome. Thanks,

as left floors. having cars about X-year still when look the at talked that years old, driving deliveries at over demand you period the are believe higher that Day. we So at at Investor still over time we the And new XX demand And we XXX,XXX we're firmly for XXX,XXX introduced that, network in look industry our looking in the railcars. replacement the we

The point other scrappage rate. to thing out there I'm is going

scrapped. for the So XX,XXX with far car cars XX,XXX expecting full through in new for very year, the year quarter, under we much the about have We're line third talked XX,XXX. production about is just that this been at which

last storage. guess And now to XX% the say rate. It's in the I'm normal it's I and in is has there down thing storage railcars to seasonal dropped, going right

those tight combining expect have supply-driven continue. we're that a to demand that It's we that we seeing, all and still So say together market.

a psychology of their a anything or common few quarters? could theme quarters? or sense. discussing to the see why reconcile And a that you're thread mean when of more I X unlock in point, there your been to to in or talk do replacement and that that bit customers of that dynamics market X To economy do the there's being capital skittish access make is to a you a the with the curious, a just we pause next view or orders customers, rate of significant you in quarters? as recent last ton the that to your bit market rail a place in structure amount that I'm support supply-demand this how

of saying Sure. And The in that to the you're hearing probably decisions has election start capital. of I'm many by talk some about what seeing levels people to caused lot are the having are. those we're delaying customers needs in, really what they come about But to see happens with somewhat good of decisions We're lots inquiry but during election. companies making regards to going this. a delay conversations their

to improved Bascome, thing more placing go other normal is right allows The the say, the to sitting on to railcars back and us I'm the chain for industry has we've XX% got going supply and our backlog lead fact of that now, orders. books times

And get year have It's it. about during car a out. down X to X back months you You that you ordered to a in once now. extended know COVID, it

change So you're little dynamics bit. a going to see those

is would their I are railcars. especially -- just you holding onto industrial Bascome, the And seeing add our we what customers Eric. they're -- shippers, this do, When is

As a rate. had Jean prepared XX% mentioned in renewal we the remarks, success

So they're these you that and idea that growth. customers railcars gives confident some for going preparing need to are they're

ordering I pace think we're not at forward. signal of the and railcars, new railcars they're send in While that that does outlook terms delivering a confidence going

guidance you feel in year either out are sales or Just helpful. here? the robust. And with RIV How looks and railcar or depth out. change picture and the any that continuing taking interest your other conviction maybe a and conservative I the that seeing maybe on secondary and to been you of traditional side can that that durability raised market makeup any clearly, the the a of partners would to would view you play your how number a mean today from just you about on how clients of continue gains from I do market the secondary in be point, came of leasing core guidance. mean putting some books the into it's long have bids? more persistently or of look cash And P&L more how

Yes, again. sure. This is Eric

our aspects, just it's rail in active. railcars, market, I building secondary think and certainly, railcars, the part whether play the new all of We we've in existing that's market the in leasing been beauty of very platform.

the both operating investment good. and point, your attractive market remain To of quite breadth an and passive the been depth equity seeing lessors have for We're for railcars investors.

seeing assumptions lease continue We're we're rates underwriter that when so deals. their seeing to they're bidding assumptions market their appetite. still improve the based on And strong and to expects on

yes, market. been So the we've secondary very satisfied with

of our we the investment, fleet fleet one lowered that's to getting investment. And drivers our why

been more speaks in that and haven't dynamics. selling railcars. been to successful as them, We secondary buying We've market in successful the pricing just

Last one. recall remarks, really with X lease I took your metrics by prepared said your ago. The consistent off That's about some in the you're you remained measure pretty I peers. but halfway adjacent if reported FLRD can't X.X, rates years of lease this through steady. repricing think since the books

rest existing pricing And mean prices that's that supply-demand that in to see lease hasn't that be fueling anything Do you another changes be horizon drive having for like book really impact. greater The seems your peers? a to that are this more on recently. to the that the years and X.X, from on thoughts an X the ability although tide your returns dynamics get rising fleet the assets? really impact, power, the of steel to drop I interest dynamic had little bit a is Trinity will in now? it reversing here seem Any drop rates an doesn't

the double-digit were XX the repriced of FLRD about positive. since We've in quarters So our XX% fleet turned last you right.

so we sequential lease improvement And that, in are we rates. those look at still seeing when

up versus If we you quarter, second quarter look XX.X% the on at third went rates.

dynamics. still it's very So strong

Why is fleet, right? It's a that? It's driven. really supply balanced

have -- of getting We cars really being number with are the the number line in built. of scrapped cars

room continue raise those to lease keeping dynamics it's allows those rates. in work which have us tight, to the to market So and

position rates we're that we're we happy with really at fleet see and the lease So where can and for the going. the

back Savage, our over would for Officer question-and-answer to President, and remarks. I session. closing Jean the like Chief conference concludes This turn any Executive to

gratitude outstanding February, year for guidance And results our I forward by hard with business. work full encouraged you the to Trinity. and to Thank and and XXXX where all you XXXX. speaking extend support results outline for I your report for again in we'll on continued you. am these my team Trinity our performance, Thank driving their to look and like plans our of for I'd our

concluded. has conference presentation. now attending for Thank today's The you

now disconnect. may You