What led to Trinity Industries Inc (NYSE: TRN) stock crash

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Trinity Industries Inc (NYSE: TRN) stock lost over 9.4% on 23rd July, 2020 after the company posted mixed results for the second quarter of FY 20. TRN in the second quarter of FY 20 has reported the adjusted earnings per share of 2 cents, missing the analysts’ estimates for the adjusted earnings per share of 8 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue of $509.20 million in the second quarter of FY 20. The revenue fell year on year due to lower deliveries in the Rail Products Group and fewer railcars sold from the lease fleet. The company’s Adjusted Operating profit in the second quarter of 2020 fell to $62.4 million from $107.0 million in the second quarter of 2019.

The company has realigned its organization from the previous holding company structure, to an operating model centrally focused on the customers’ business needs. The company is establishing additional structural savings goals that will be part of the near-term focus. The company is also prepared to take further actions to reduce the cost structure and manufacturing footprint in the event of a prolonged railcar down cycle. The company has generated second quarter cash flow from operations of $154 million, has done a net investment of $94 million in the leasing and manufacturing businesses, and returned $24 million to shareholders in the form of dividends. The company’s liquidity continues to be strong at $709 million at second quarter end, and has been further increased by the recent completion of the $225 million rail financing and amendments to the corporate revolver in the month of July.

Meanwhile, TRN’s businesses are facing challenging market dynamics due to the historic decline in railcar loadings and the resulting underutilized railcars in North America. Commercially, the company’s primary focus is to maintain the utilization of our lease fleet, then to meet customer demand for newly manufactured railcars as appropriate. The lease fleet utilization is holding about 95%, with pricing pressure on lease rates, and the production capacity for 2020 railcar deliveries is essentially sold. The timeline for a recovery in the rail sector is still unclear currently due to increasing COVID-19 cases in the U.S. potentially threaten the recent improvement in economic and rail market activity. However, the company is seeing a strong rise in railcar inquiries relative to last quarter from strategic buyers and large leasing customers, and the company anticipates a number of these will turn to orders or lease contracts in the near term.

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