TRN - Earnings call transcript Q4 2024 | Trinity Industries, Inc.

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Operator

Good day, and welcome to the Trinity Industries Fourth Quarter and 12 Months Ended December 31, 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 include statements as to estimates, expectations, intentions and predictions of future financial performance. Statements that are not historical facts are forward-looking. of Trinity's of and risks, differ certain in -- to for SEC a materially directed actual which description cause in a business any statements. from are those Form outcomes the other XX-K filings change results expressed Participants or could forward-looking to which issues and

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

Leigh Mann

and the full morning, Good We you company's everyone. Conference fourth for quarter XXXX Thank you, operator. Call. year joining appreciate Results Financial us

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

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

along metrics Investor appendix reference on provided today, quarter Eastern Time Presentations the the today's will www.trin.net. to non-GAAP of we the XX, available GAAP page the a.m. non-GAAP During XX:XX are certain of in Events Relations and A available earnings investor after Investor is call measures midnight These accessible the are are metrics. slides slides which under The quarterly the financial our at will and call website comparable the our on reconciliations the of of information link. event website, on XXXX. through February replay portion Relations under call website. be conference with Replay Presentations fourth Events

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

E. Savage

the like I XXXX Trinity employees of you, extend morning, for Thank today, in power financial To gratitude would strong results the and and to good to Leigh Anne, the delivering and my platform. begin demonstrating all potential Trinity everyone.

within XX% over driven reflecting increased $X.XX improved gains target rates, year range cash net million, external of We volume from margin $XXX an concluded of year XXXX. increase, flow and performance adjusted increase Our represents sales lease a XX.X% of a with an ROE EPS significantly adjusted lease XX% with operations repairs. on our the of portfolio and higher full by year-over-year

During cyclicality to a environment, a is last we Safety words a safety reduced our half our like demonstrate cycle. our June, value incidents safety I provide of that our Day we our believe evidence each solid to emphasized volatile our would for Trinity of about approximately of the year-over-year and the less optimize years, continued to also few perform. several XXXX say improvement have performance. last would metrics the the for consistently We core through incremental results XXXX in achieving average operating with industry platform manufacturing. Investor combined ability of in returns

forward look As market in confident we in to of balanced light our XXXX, we business, especially the the remain of strength Leasing conditions.

our from our the for for Today, provide results I current to segments will call industry environment there discuss continue business. thoughts Eric this that pressures to discuss improving observations, fleet and the returns XXXX driven on expectations. pass then our financial We our manufacturing to provide guidance business and and pricing While market ongoing railcar favors additions by are us to forces, our existing believe moderated fleet enable will existing assets. macroeconomic thereby specifics upward,

with the start Let's market update.

XX,XXX year We these For railcars. levels believe The total, XX,XXX hoppers. XX,XXX Trinity's XXXX full the of concentration comprising about railcars approximately years few orders with backlog received see over in our cars multiyear XX,XXX the for industry just were the at backlog next increase with just railcars levels stands box order. industry delivered the and and XXXX, below covered attrition expect including under and to XX%

XXXX We XXXX. through planning continue railcars to the industry anticipate deliveries about for XXX,XXX of of period

expect in a guidance discuss in industry deliveries our section, will XXXX. As we for down step Eric

believe policy by XXXX as changes we and been in stated, than lower implications. the muted and become that narrower Nevertheless, volume characterized recently being order surrounding levels railcar more elevated, by was uncertainty floors. cycles, election previous acceleration We influenced anticipate cycle more previously build orders an inquiry explicit. XXXX tariff have in higher foresee this as peak However, and we

seen and the Chemicals volume positive [indiscernible] signals in the segments. have We Agricultural,

replacement Additionally, we tank and for have vehicular service visibility flats, into cars. opportunities general small cars grain

economy internal The railcar industry influenced in challenges, forces. railcar by confident and broader numerous production. macroeconomic remain industrial currently are for these we our Despite projections

now our Services are we segment Beginning provide some returns the Digital Leasing and fleet, of business, Railcar shareholders. to Maintenance I includes importantly, segment, More value & Leasing lease and the highlights. Logistics & businesses. maintaining our with business would utilization for like driving Services which committed to

& continues Leasing persist we Services in to trend this anticipate business and Our to favorably, perform XXXX.

generated quarter, a to $XX fourth million. Services segment and in on with profit the a $XXX of sales segment revenues XX%. amounted of the the Leasing $XXX Gains million & margin of port portfolio million operating In

continue For upward. the our $X.X year-over-year to full we year increased fleet XXXX, revenue Leasing million lease by as segment billion reprice $XXX of

year-over-year increased our results business favorable volume with observed also of an in repairs. external We Maintenance

We of Our and forward-looking FLRD lease favorable. the XX%. differential XX.X% remain metrics also or fleet rate the lease future a year with of concluded utilization rate

upward. XX% renewal we fourth allowing quarter, which Our was balanced, remains in believe to to us the market continue the push rate indicates success that pricing

$XXX Full now indicating a sales ample year over have environment, we improvements. in double-digit with portfolio of for repriced have that further pricing runway FLRD half lease $XX million, million. were just gains We still fleet our

million lease secondary but expected, As Trinity's in million. a XXXX guidance year gains $XXX healthy our represent than net $XXX were million, market. full of slightly very below investment these was still lower fleet slightly $XXX to range

has sales $X.X fourth market for the billion. We orders the the year-end bringing railcar year to XX,XXX. favorable. in in railcars backlog a resulting of received quarter railcars the XXXX X,XXX total of secondary Trinity as delivered for volume X,XXX in remained exceeded Our expectations

performance flat by profit XX% proud As to $XXX this mentioned we accelerate in operating I see in the policy million top the Despite impact. call, certainty XXXX. increased the of improves relatively around compared at the to and of orders as expect of segment. market decisions am revenue,

Our XXX over a basis to full of range high margin improvement at our year the of guidance X%, end point X.X% representing was operating of X% XXXX.

Parts business in well also exceptionally Our XXXX. performed

expanding improvements lease for As previously environment. fleet our noted, and continue our high-level are promising I opportunities some in current network and XXXX, we wanted growth focused on this business. and maintenance business guidance our Parts identify will but to to we share on thoughts to for support operating Eric provide

are from heard regarding deferring cycle, this have the our is decisions regulatory tariffs. you As certainty investment and customers greater companies there until environment, including other earnings clarification

the and impact potential engaged remain our have may informed tariffs business. on about We Manufacturing

XXXX resulting to range includes additional various may account of the risk focus return a $X.XX is the our investment on further timing improving assets. continues, That guidance in If scenarios and uncertainty Given resulting the uncertainty valuable these delays to EPS in tariff for investment our or there the and orders, then delays, railcars, also means own guidance. we manage approximately railcar be from primary our and XXX,XXX decisions.

to I high-level the our targets over our performance to against our XXXX. statements, expectations Eric will turn financial discuss now for our guidance call longer-term on and

Eric Marchetto

revenues by fleet. quarterly eliminations good year the our statement. quarter I'll quarter with reflects were of of higher Thank consolidated $XXX statements. as and and our financial begin everyone. fourth deliveries morning, income million lower Starting XX% you, deliveries lease full Fourth Jean, added and discussing to

over XXXX. were year, full billion, revenues improvement a representing slight the $X.X For

our fleet. year, delivered full XX% were the of For lease to deliveries

operating by higher in in partially on As by Products profit improvement Jean year railcar gains lower and margin the XXXX, noted, improved Group, eliminations. significantly driven offset Rail full primarily sales

tax lower-than-expected in the from rate. quarter benefited a We

flat adjusted our year, full performance. I effective full flat a year and the For as significant was revenue it platform XX% environment. was Jean's despite occurred tax EPS to economic Fourth cycle. that representing reiterate generate XX.X%. has a quarter strong earlier the was point would to demonstrates This encouraging XXXX, delivery improvement improvement and strong over that EPS returns adjusted $X.XX, $X.XX ability like our this earnings reflecting and rate operating is a

Moving of million. the and in fleet by investment from continued million $XXX $XXX in cash Net million million returned offset additions $XXX We which was XXXX, was to December, $XX Full dividend comprised enhancements included market X.X% based million our year operations flow $XX share. flow to sales. dividend announced the now million and $XXX secondary fleet which share year-end cash of for year $X.XX commitment $XXX statement. in is repurchases. the dividend a approximately to to quarterly per and we increase price payments yield $X.XX our In of on through dividend This million stock growth. a represents shareholders reinforces

XX years. over for dividend a paid consecutively have We

this we loan-to-value the range Investor our to to on XX% of wholly XX%. year planning ratio in period provide our progress completed within At Investor Day XXXX. guidance lease XXXX an the target provided fleet Having owned was would the first quarter of longer-term our period, fourth in I against our Our to for like of June, targets. XX.X% Day update

goal fleet net X-year investment $XXX a to $XXX fleet set for million. we of our billion. XXXX, was $X In investment net First, million

the mentioned, secondary capitalized stronger XXXX. expected, and than this market proved on Jean we in As

to $XXX $XXX run us aligns X-year with Our million million of XXXX guidance rate. the

billion. cash a operations and $X.X we XXXX. X-year this to sales portfolio was encompasses sales was from initial exceeded gains portfolio target achieve $XXX sales railcar cash Cash In operations on gains a forecast. a that cash million we million. we flow XXXX introduced net of with lease and from $X.X $XX with operations cash metric target. we Second, billion $XXX gains Combined, believe recorded from of are X-year and continued to lease on flow in position on gains for favorable to XXXX, in flow Therefore, million, strong amounted flow

ROE adjusted with our over turnover concluded improved planning in from Finally, to and net on sheet ROE we XX.X%, of the XX% the profit improved expected adjusted XXXX, adjusted of of XXXX, up XXXX XX% we In driving a XX% by equity stated our our to We ROE XXXX. XXXX XX.X%. range optimization. asset an we and our period. that compared significantly X-year increase we return be significant In adjusted to margin, our balance

our the Overall, We to to range target remain are expect targets. in XXXX. ROE we track on adjusted within meet longer-term

X believe can We in as generation economic highlight to flow durable returns where throughout the investment cycle. value cash these fleet, create and we a business; our continue targets optimized

guidance. Moving to XXXX

production. in uncertainty a to we tariffs due relatively decisions mentioned, observed have Jean delays ordering industrial around As flat U.S. and

which railcars, deliveries. deliveries XXXX Given XX,XXX is industry approximately about these of realities, expect than lower XX% we XXXX

We continue as for backlogs plans will grow industry year expect XXX,XXX a in the deliveries believe see X-year XXXX. to be railcars, deliveries meaning around more to we this that period industry over

lower Our fourth for late prepare the a quarter results reflect environment. delivery in decisions year made to

to improved as well as with a cost structure, also efficiency, making changes addition In in focus their chain the continued facilities cost enhancements automation. management supply structure productivity our to corporate and on

XXXX, results segment the savings, compensation. and SG&A sales. in corporate fleet investment In market of The million support lower costs million going be in we X-year million and a incentive $XX into fewer higher railcar fleet to lower to compared cost percentage expect reflecting $XXX expect net XXXX among approximately of as will SG&A of our We effect cost our XXXX reductions. of $XXX split targets deliveries secondary total lease including and

capital $XX We expenditures $XX expect year. of this to million manufacturing million

XXXX guidance introducing are share. per $X.XX our we Finally, to a at $X.XX EPS range of

In segment, the lease and expect inclusive XX% we of & reflect gains operating continued segment to strength XX%, Services margins in between Leasing rates.

In in approximately sales with deliveries fleet to assumes be X% margin year the on going segment to X%. million between Rail and our guidance full between $XX and gains Products expect XX% deliveries railcar a segment, million. of lease new portfolio lease $XX lower We the

Leasing XX% year a a be year. expect of business. In rate of confident continued we Services to tax We our XXXX & that full strength the XX% are for for will approximately conclusion,

to your are to to lessor flexibility Our you market the unique remains support. our are managing to both fleet the needs adapt our to returns focus and as and market. fleet changes enhancing We and remains maintaining manufacturer, balance. attuned look appreciate on activity in position Leveraging a while a ensure the carefully in sharing lease swiftly we from production forward with our progress

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

Operator

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

Bascome Majors

half the the for even any coverage Can or looks a about maybe how on bit quarter? And differently you in second shaping first fourth backlog that the half the the little talk year? versus

E. Savage

Great Bascome. Sure, question.

and pick to to placing for So we've are Right saw they tariff came delaying then about be in going seen remarks, we has the deciding we're or customers in in. impacts industry levels the those question question the be. people some expecting decisions know tariff up what prepared the down uncertainty deliveries around election. XX,XXX. was to 'XX XXXX said as now, orders of What We on inquiry XX% the until

the of get clarity out place. the guidance. higher give know be do macroeconomics there, half lot So tariffs A off of second that happen first would depend and we we regulations on you months going that say into those is better that uncertainty of going over comfortable quarterly will I or But in half to other you as next we're the don't believe go letting based we and with than couple the year. the to that of what's know

Bascome Majors

just to And talking cadence? about half are second when you Or you about better half, earnings? talking first you the the deliveries say clarify, and than order are

E. Savage

I'm talking about both in that.

'XX, about to cars and look means as goes at 'XX expect to X back pick do the which strongly if there'll XXX,XXX you still be deliveries the up. and backlog tick we between expecting up delivered because we So 'XX years, year we're on believe

Bascome Majors

appreciate tariff on to given throughout that. guidance uncertainty And color the piece, your the you've I

fluid maybe the margin terms that how been I purchase you able who some before might get cars or delivered. something is, mean, buyer more uncertainty of still adjust up contracts? that your changes might pay that of Given have new that shared eaten how between by your to is the

and understand that if take something maybe how hit a risk want share in way Just the one full doesn't have that to a side the evolving to in sharing plan that's if that you changes? and

E. Savage

said, us to have look a you in contracts some chain our pass on. in have tariffs good majority we those tariffs also When them, would which of That those working being what the supply compliance team allow Sure. really could in our escalation the overall, be. are who and at of to mitigate tariffs

how between avoid a of to tariffs. groups can minimize passing we're working all on different our taking to It all that We're But just pass-through. So of can the customer. we a see that is risk not effect. we on

Bascome Majors

but last When car you're is changes that holding sheet, on anticipated just business. iterating from own And a the Lease the car if one, least? leases of cause balance escalation similar question your about at materially the there was what cost

E. Savage

what staying too. lease in FLRD Yes, being as that there bullish our that, is of know, in double-digit recently interest do with just on we for we're right? still rates, gone you higher longer, And escalation positive range. repriced can our over rates XX% We've rates with lease

rates. to those still we So room raise see continue to

Operator

Gabelli [Operator Instructions] The next Funds. question comes from Justin Bergner with

Justin Bergner

Just how come as could down get that lower of idea SG&A so step how incentive as million to to sort you in maybe $XX to how you or 'XX? that framed think, might year going first comp mentioned just it off, you an this was costs of is contributing, part guidance back much much to I decline, upward the SG&A the quantify

Eric Marchetto

XXXX. we had Sure, good Justin. year effectively, in And a

our So compensation incentive was up.

other kind our As coming magnitude, from back of takeout, at compensation. it's is When called then reset That's of is $XX kind cost. than But we million everything the whether we less it cost guidance, look you spending put meaningful out. the cost other more incentive why we half And number. that's to the half of than of a headcount savings it or target.

Justin Bergner

And understand year Okay. you're of It's of it's mean, reset a just a I not off incentive lower-than-normal 'XX. forecasting good just that, to more that in a comp.

by to 'XX, that... and could in what go hopefully up not up going it's go So does

Eric Marchetto

on correct. That's have short-term -- It's about compensation just a our variable we program large all incentive.

set off we a we're our have and we target targets so the planning target. set that the based And guidance when is our guidance, we've and

Justin Bergner

Great.

came confirm a numbers to me just some fast. of to Secondly, these bit

margin correctly rate please X% or or did tax and I -- correct if XX% the products didn't? Rail hear XX%, railcar to the I me X% to Products sorry, So

Eric Marchetto

Rail On heard tax, got X%. Group the In to for you right. guidance, the the X% margin you it

Justin Bergner

is weighed And help and guess, costs me margins press sale, All what I in 'XX? into lastly, higher and persisting that ex then compliance right. leasing talks services gains maintenance understand just quarter, the the on release and down about

E. Savage

Yes.

look come interval up the we've Justin, last built been So maintenance, the cars years. talking in when you about that the compliance that's XX at were on

be the on interval is elevated plus that maintenance and between couple lower that increased maintenance to of XX%, over. compliance those event until the for that XXXX of you're expect the segment cost leasing compliance after years That's that seeing costs XX% staying margin and sale. some We weight secondary market it's for next

Justin Bergner

reflects $XX,XXX Or this sales? in Got you. realized more? All right. was sales sales, think to secondary you current to market I there's as as do secondary like And the then environment best a do new think you , in normal think for the no secondary one -- you railcar do year could the estimate, normal market but $XX,XXX

Eric Marchetto

look year, you you market if $XX our guidance secondary if last -- million to go about of So back gains. was

to similar so And projected. Included so range, 'XX, $XX net CapEx have million fleet a good the this We $XX to in think and lower our last 'XX reflects a our we see net million is that than that guidance and $XXX in our we leasing that million we was to little This kind of year, year year for is we're activity. in reflects had investment. CapEx increased returns million fleet nice back $XXX bit there. that

And but than value sell the invest rather out of than we fleet out sell the a more to right think the so in term creation it's fleet, more long fleet it's rather choice choice. of the

Operator

Andrzej with from comes Sachs. question Goldman next The Tomczyk

Andrzej Tomczyk

industry expect in just think to implied to relative And I the roughly Or the roughly deliveries had to deliveries question XXXX. relative lower? I think XX%? fall versus should XXXX, expectation, range you higher the Trinity's that on down First XX% for or we would

E. Savage

same expecting of down XX% between our the be frame. to and normal in range, time around deliveries that to industry expecting and are is be XX% we we're Andrzej, which during So XX%,

been and typically there. we have fall So there

Andrzej Tomczyk

for on just the And it. manufacturing. margin Got

I how to year. the quarter? the think full you Is first about way there may year off starting could that think trends mentioned X% in any X% the through we

E. Savage

not of it typically, setups that we did half the to and So on what's we're mix can in number going than We then all giving range the the first of quarter, the have indicate be volume. because that expect better a again, quarter-by-quarter that and also the vary half. depending margin on we there, cars, second

just to So okay. see that's if I'm walk standpoint. ask from Eric improvement helpful. may 'XX, going 'XX Andrzej, to and that from I it would you to expect to ahead a And go be bridge give

Eric Marchetto

welcome coverage you Yes. I Sure. Trinity. the work to appreciate Andrzej, the team. doing on

So in look just when on you range. you well look of you on we've -- -- We from down just kind at as down 'XX railcar about 'XX midpoint being you last about look deliveries and XX% to -- talked are our you the when of see We at right kind sale XX% at guidance. if kind that of it. our gains to of frame you path see are year the

then you X%. you our take down to And the earnings about midpoint, go if guidance, it's

just this context manufacturing look to plan, take volume a leading you when little macro of on that's when really lower about which lower side you platform on is to when the margins related. consideration. frame you performance at bit deliveries that versus into that, X% we're side So X-year the excited But the our X%

at headwinds look and We just tailwinds.

adds. the more deliveries, lower we're I on also, fleet planning So as mentioned,

higher have eliminations. we So

our deliveries going We to XX% our fleet. of will have

due mentioned, points. compliance gains XXX to question And We also, Justin we to tax lower basis referenced higher a are go events. car on the then rate mentioned on sales. I his as maintenance about earlier, up as expecting Jean

headwinds. lease guys good on we're good kind of So price still environment. very The are a are those

little FLRD fleet, and expecting, more so of XX% fleet we than our And as our XX% double-digit environment. of a a we're reprice

fleet expect in is balance. to We as that continue nicely the

fourth XX% power renewal the And so assets X-year we have with pricing up on to terms. quarter. renewed XX% so still We renewing about reiterate our in leases of and

we've going million locking contractual in really an savings, that cash those million. of as up environment. then in cost fleet $XXX to longer $XXX earlier. million flows And some we're we growth I taken mentioned, And So referenced $XX to the see then

all performance we about economic the equity from that fairly feel the on environment. in of improving business. return expecting spot balance flattish take account, The good should we're sheet resilient into you good think, real is, We're earnings So on be and in we in the that a the the a 'XX. platform focused

Andrzej Tomczyk

the I final from to X there. questions just Maybe color my off, appreciate end. close

You think, mentioned, up were inquiries picking the I order into XXXX.

unless would that's that that's -- any question just then I specific? wrong, If Parts the to perform be, lead car update doing, question. So in car the you there's tank could freight that's And if and or expected first How last how that just heard on the business? is XXXX?

E. Savage

Thanks, Andrzej.

we cars still been strong I So picked This level there. the have demand. a at of fairly will car of there. a still when some is We've have recovery, look replacement say, led freight they more the inquiry, up. tank But inquiries on got consistent

we're is when So the really that both external work the and for sales. business, internal they're to us see go nice with doing for overall you When you're pleased at that Parts looking to that.

look well with with at and automotive XXXX. performed the we go it's out seen very extremely racks increase, in Holden, the well acquisition we of that our out we've As proved did in

up also provide parts picked ways that continue to and and for new more own look areas, to they we the our fleet or has external Traditional other both to business lease fleet out in agreements can there. either that's

other areas we can that and there, business. for that improvement to look we'll grow good continue So

Operator

Okay. Was Andrzej? followup, a there

Andrzej Tomczyk

That's it from my end.

E. Savage

the I your everyone ahead thank and go go time close. I'll today. for to to want

our platform impacts policy a returns uncertainty margin it consistent around the performance. generate our strength to our how and our While and ability XXXX and government business, believe we there's still will strong lot that performance of demonstrate of

you and on our progress look to sharing our results call. we So earnings next forward first quarter with

Operator

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

disconnect. now You may

Trinity Industries (TRN) 20 Feb 252024 Q4 Earnings call transcript