Earnings call transcript: Trinity Industries sees Q2 2025 growth amid market optimism

Trinity Industries Inc. reported its second-quarter 2025 earnings, highlighting a revenue of $56 million and a GAAP earnings per share (EPS) of $0.19. The company’s stock closed at $27.59, reflecting a 1.88% increase. According to InvestingPro data, Trinity maintains strong dividend credentials with 55 consecutive years of dividend payments and 15 years of consecutive increases, offering a current yield of 4.3%. The stock has experienced a challenging year, down 17.4% year-to-date, though it maintains a healthy current ratio of 2.38.

Key Takeaways

• Trinity Industries reported Q2 2025 revenues of $56 million.
• GAAP EPS for the quarter was $0.19.
• The company returned $90 million to shareholders through dividends and share repurchases.
• Trinity delivered 1,815 railcars and received orders for 2,310 railcars.
• Full-year EPS guidance is set between $1.40 and $1.60.

Company Performance

Trinity Industries demonstrated resilience in Q2 2025, with revenues reaching $56 million and a GAAP EPS of $0.19. The company focused on manufacturing optimization and automation, which contributed to its strong performance. Trinity’s ability to deliver 1,815 railcars and secure orders for 2,310 railcars reflects its robust market position. The book-to-bill ratio reached 1.3x for the first time in ten quarters, indicating healthy demand. InvestingPro analysis reveals 8 additional key insights about Trinity’s performance and prospects, available to subscribers through the comprehensive Pro Research Report.

Financial Highlights

• Revenue: $56 million
• GAAP EPS: $0.19
• Year-to-date cash flow from continuing operations: $142 million
• Net lease fleet investment: $233 million
• Liquidity: $792 million

Outlook & Guidance

Trinity Industries is optimistic about the second half of 2025, maintaining its full-year EPS guidance between $1.40 and $1.60. The company anticipates net lease fleet investments of $250-$350 million and expects gains from lease portfolio sales to range between $50-$60 million. Trinity’s focus on improving order volumes and market conditions is expected to drive future growth. Based on InvestingPro Fair Value calculations, the stock appears slightly overvalued at current levels, with a P/E ratio of 22x and EV/EBITDA of 12.2x. Discover more detailed valuation metrics and analysis in the Pro Research Report, part of InvestingPro’s coverage of over 1,400 US stocks.

Executive Commentary

Gene Savage, CEO, stated, "We believe the second quarter was the bottom of that cycle," expressing confidence in the company’s future performance. Eric Marketo, CFO, emphasized the company’s resilience, saying, "The resilience of our business is on full display this year against a backdrop of low industrial growth and macroeconomic uncertainty."

Risks and Challenges

• Industry railcar fleet contraction could impact future orders.
• Macroeconomic pressures may affect market demand.
• New tax legislation could influence business decisions.
• Workforce reductions pose potential operational challenges.
• Market saturation in the railcar sector may limit growth opportunities.

Q&A

During the earnings call, analysts inquired about the impact of new tax legislation on Trinity’s business strategies. The company addressed potential implications of a railroad merger on the industry and clarified expectations for production and margin improvements. These discussions underscored Trinity’s proactive approach to navigating industry dynamics.

Full transcript - Trinity Industries (TRN) Q2 2025:

Conference Operator: Good morning and welcome to the Trinity Industries Q2 twenty twenty five Earnings Call. All participants will be in listen only mode. After today’s remarks, there will be an opportunity to ask questions. Please note this event is being recorded. Would now like to turn the conference over to Leanne Mann, Vice President, Investor Relations.

Please go ahead.

Leanne Mann, Vice President, Investor Relations, Trinity Industries: Thank you, operator. Good morning, everyone. We appreciate you joining us for the company’s second quarter twenty twenty five financial results conference call. Our prepared remarks will include comments from Gene Savage, Trinity’s Chief Executive Officer and President and Eric Marketo, the company’s Chief Financial Officer. We will hold a Q and A session following the prepared remarks from our leaders.

During the call today, we will reference certain non GAAP financial metrics. The reconciliations of the non GAAP metrics to comparable GAAP measures are provided in the appendix of the quarterly investor slides, which are accessible on our Investor Relations website at ww.trin.net. These slides are under the Events and Presentations portion of the website along with the second quarter earnings conference call event link. A replay of today’s call will be available after 10:30 a. M.

Eastern Time through midnight on 08/07/2025. Replay information is available under the Events and Presentations page on our Investor Relations website. It is now my pleasure to turn the call over to Jean.

Gene Savage, Chief Executive Officer and President, Trinity Industries: Thank you, Leigh Ann. Good morning, everyone. Our second quarter results underscore the solid performance of our leasing business and Trinity’s strong ability to generate substantial cash flow. The North American railcar fleet remains in balance, with ongoing improvements in pricing. Although customers have delayed their capital expenditure plans and new railcar decisions due to evolving trade and tax circumstances, they continue to retain their current railcars.

Additionally, we are starting to see a recovery in new railcar demand as sequential order volumes improve, and we generated a book to bill of 1.3 times. As detailed in our prepared remarks today, we expect an increase in deliveries from second quarter levels and continued improvement across the business in the second half of the year. Before discussing our quarterly results, I would like to provide a brief market overview. Inquiry levels remain healthy, and these inquiries are translating into increased order activity, albeit at a slower rate than initially anticipated. We are encouraged by a sequential pickup in orders in the second quarter, both for Trinity and for the broader industry.

The industry fleet has experienced a modest contraction considering lower year to date deliveries for 2025, coupled with ongoing fleet attrition through scrapping. Given current production levels and improving order environment, the industry is on pace for full year industry deliveries in the range of 28,000 to 33,000. Within the existing railcar market, carloads have improved in the second quarter, primarily driven by strength in the energy and agriculture markets. Railcars and storage have picked up slightly, consistent with normal seasonal trends. We continue to monitor recent tax legislation and ongoing trade developments and remain generally optimistic about their impact on our business.

I will now highlight segment performance for the quarter. Railcar Leasing and Services segment, which includes leasing, maintenance, digital and logistics services. Our leasing business continues to perform exceptionally well. Segment revenues have increased both sequentially and year over year, primarily due to higher lease rates, reflecting our strategic efforts to reprice the fleet. The maintenance business has benefited from favorable pricing and a positive mix, contributing to a 21 year over year increase in quarterly maintenance services revenue.

The future lease rate differential, or FLRD, stands at an impressive 18.3% for the quarter, marking 13 consecutive quarters in double digits, during which 63% of our fleet has been successfully repriced. Renewal rates in the quarter were 17.9% above expiring rates, and our renewal success rate was 89%, demonstrating our ability to continually drive lease rates while sustaining a high fleet utilization of 96.8% during the second quarter, indicating a well balanced fleet. During the quarter, we completed $29,000,000 in lease fleet portfolio sales with gains of $8,000,000 We remain active in the secondary market as both a buyer and a seller and anticipate this trend will continue in the second half of the year. The cost of revenues in the segment increased by 13.7% year over year, primarily due to higher maintenance and compliance expenses for the lease fleet, as well as a change in the mix of external repairs and our maintenance services business. Turning to the Rail Products segment, which includes our manufacturing and parts businesses, second quarter results were in line with our expectations.

Due to lower order volumes in preceding quarters, we adjusted production to match the pace of customers’ delayed decisions, delivering eighteen fifteen railcars in the quarter. This resulted in a segment operating margin of 3%, which is inclusive of costs associated with workforce reductions. We are encouraged by sequential improvement in orders. In the quarter, we received orders for 2,310 railcars and achieved a book to bill ratio above one times for the first time in ten quarters. We believe this positive order momentum will continue, supported by inquiry levels consistent with replacement level demand, favorable tax policies, and increased trade certainty expected in the near future.

We are well positioned to respond to further market improvement as the year progresses. I would like to commend the Rail Products Group for their strategic initiatives over recent years, including optimizing manufacturing operations, investing in automation, and lowering the business breakeven point. Your hard work is evident in this low order volume environment. We are maintaining our full year operating margin guidance in the 5% to 6% range for the segment. This outlook is underpinned by our expectations of stronger deliveries in the latter part of the year, better fixed cost absorption, a streamlined workforce and continued efficiencies through automation.

As we enter the second half of the year, we remain confident in our ability to deliver strong performance across our business. We will continue our efforts to reprice a lease fleet and capitalize on favorable conditions in the secondary market. We anticipate an increased pace of quarterly deliveries, benefiting both revenues and margins. Additionally, we expect our backlog to increase as pent up demand translates into orders, driving momentum through the latter half of the year and into 2026. I’ll now turn the call over to Eric to talk through financial results, as well as our updated guidance for 2025.

Eric Marketo, Chief Financial Officer, Trinity Industries: Thank you, Jean, and good morning, everyone. I will begin by discussing our second quarter financial statements, starting with the income statement. Revenues of $5.00 $6,000,000 and GAAP EPS of $0.19 in the second quarter are consistent with our expectations given a slower delivery pace in the second quarter. As Gene mentioned, lease portfolio sales proceeds were $29,000,000 in the quarter. Our effective tax rate in the quarter was 15.8%.

In the quarter, we purchased $40,000,000 in transferable tax credits at a discount, which benefited our quarterly tax rate. These credits were used to offset the company’s federal tax liability for 2024. We have incurred approximately $8,000,000 of severance expense year to date, split between Rail Products Group and Corporate. We are expecting full year severance expenses of $15,000,000 with remaining severance costs to be incurred in the Rail Products Group. Given the workforce reductions, as well as lower incentive based compensation, we expect to realize about $50,000,000 in savings across the enterprise in 2025.

Net gains on lease portfolio sales are $14,000,000 year to date, 8,000,000 of which was in the second quarter. As I said last quarter, we expect gains on sales to be weighted to the 2025. Moving to the cash flow statement, our business continues to demonstrate its cash generation potential. Year to date cash flow from continuing operations is $142,000,000 As we go forward, we expect the effects of recent legislation to benefit our cash from operations. Year to date, our net lease fleet investment is $233,000,000 We remain active in the secondary market both as a buyer and a seller.

Secondary market purchases allowed us to improve the yield on our fleet while also growing our lease fleet. Our full year guidance for net lease fleet investment reflects higher originations and consistent secondary market adds, offset by significantly higher secondary market railcar sales in the second half of the year. In keeping with our capital allocation framework, we increased share repurchase activity to $31,000,000 in the quarter. Year to date, we have returned $90,000,000 to shareholders through dividends paid and share repurchases. Finally, our year to date investment in operating and administrative capital expenditures is $18,000,000 Our balance sheet positioning remains strong, providing us with significant flexibility.

With $792,000,000 in liquidity through our cash reserves, revolver and warehouse availability, we are well positioned for a variety of market conditions. Our loan to value of 69.4% on our wholly owned fleet aligns with our target range. In the second quarter, we successfully refinanced and upsized our TRL 2023 notes, further optimizing our debt portfolio and positioning our balance sheet for continued value creation. As we look ahead to the remainder of 2025, we’re maintaining our industry delivery forecast to a range of 28,000 to 33,000 railcars. While railcar orders have recovered more slowly than anticipated, we remain confident that demand will further materialize with some demand shifting into 2026 based on customer conversations and market insights.

We are adjusting our net lease fleet guidance to a range of $250,000,000 to $350,000,000 with approximately 35% of our 2025 deliveries expected to be added to our lease fleet. This slight reduction in fleet investment is due to lower originations and continued utilization of our robust secondary market. We anticipate gains on lease portfolio sales for the full year to be between $50,000,000 and $60,000,000 Our operating and administrative capital expenditures guidance remains steady at $45,000,000 to $55,000,000 Finally, we are maintaining our full year 2025 EPS guidance at a range of 1.4 to $1.6 This projection indicates a significantly stronger performance in the second half of the year, which aligns with our expectations. Included in the annual guidance is severance expense of approximately $0.14 per share. Additionally, we are maintaining our segment margin guidance with an improved performance in the Rail Products segment expected in the latter half of the year, primarily driven by higher deliveries, partially offset by severance expenses.

The resilience of our business is on full display this year against a backdrop of low industrial growth and macroeconomic uncertainty. Anchored by our leasing business, we have seen improved performance in our fleet. In the manufacturing segment, our people have responded to changing customer demand and position Trane to perform in a period of lower demand. As we move forward, we are poised to realize additional operating leverage across our platform. Operator, we are now ready to take our first question.

Conference Operator: Thank you. We will now begin the question and answer session. And our first question comes from Bascome Majors from Susquehanna. Please go ahead.

Bascome Majors, Analyst, Susquehanna: Thanks for taking our questions here. Congratulations on getting production aligned with orders, and it’s encouraging to hear that, you know, you continue to think that goes up from here. Can you talk a little bit about the production plans for the second half and, you know, how the build rate should probably trend versus where you were in the quarter? And, ultimately, are you aligning that to where orders are now or where you think they’re going as the economy improves? Thank you.

Gene Savage, Chief Executive Officer and President, Trinity Industries: Well, thanks, and good morning, Bascome. Want to start off by talking a little bit about the cycle. Remember, we told you that we were working to optimize our products group to be able to perform through a cycle. At the bottom of the cycle, we wanted them to at least be breakeven. And when you were in the mid to upper part, they would be accretive to our overall earnings.

We’re saying that we believe second quarter was the bottom of that cycle. So we’re proud of what the products group was able to do and delivering the 3% margin. We did have lower deliveries in the second quarter, and that was mainly due to resetting the line to the pace of production that we’re expecting for the second half of the year. You heard us say that we’re still expecting margins to be 5% to 6% for the products group, which means we’re expecting volume to increase for the second half of the year for those deliveries. And that aligns real well with the level of inquiry levels we’re seeing and the customer positive customer sentiment that’s starting to come through.

Bascome Majors, Analyst, Susquehanna: And to the cadence of deliveries and margins, do you expect it to be fairly stable through the next two quarters? Or will there be some lumpiness as you continue to build in the new configuration?

Gene Savage, Chief Executive Officer and President, Trinity Industries: So we expect it to improve through the year.

Bascome Majors, Analyst, Susquehanna: Margins and deliveries, or or was that a margin comment?

Gene Savage, Chief Executive Officer and President, Trinity Industries: That’s both.

Eric Marketo, Chief Financial Officer, Trinity Industries: Thank you.

Gene Savage, Chief Executive Officer and President, Trinity Industries: You’re welcome.

Bascome Majors, Analyst, Susquehanna: And Can we go to taxes? You talked about, purchasing some federal tax credits to reduce the tax rate. You know, my understanding was, you know, as a leasing company, the cash tax burden is pretty light to start with, and then you’ve gotten this, you know, big beautiful bill, full expensing, which I’m guessing is improving that framework for you. Can you talk a little bit about, you know, tax management, you know, why that made sense for Trinity? And ultimately, do you have a run rate estimate of the cash tax saving from the full expensing deduction versus where you were before?

Eric Marketo, Chief Financial Officer, Trinity Industries: Yeah. So Bascome, great question. Picking up on that. So the tax credits we purchased were $40,000,000 of tax credits and they related to the 2024 tax year, which is when you had a much lower bonus depreciation rate. You also had limitations on interest expense deductibility with the section 163 J.

So last year we were expecting to be a cash taxpayer. Now with the new tax bill, you’re right in that we, the full bonus depreciation and the fix on 163 J that will significantly reduce our tax burden and improve our cash flow from operations, which I mentioned in the script. So you’re definitely seeing that. The other thing I would say on the tax bill is the bigger piece of it is not only what it does to us, but what it does to demand. So what I mean by that is when you think about underwriting investment decisions, you didn’t have clarity on the tax bill, you didn’t have clarity on regulatory reform, and we haven’t had clarity on tariffs.

Now we have clarity on the tax bill and we’re gaining more clarity on the regulatory environment and businesses being able to do deals. And then with the flurry of announcements on tariffs, you know, while it’s not clear yet, I think it’s safe to say we’re not going to have a lot more ninety day extensions and we’re getting clarity. And so that will help businesses underwrite investment decisions. And we’re very, you know, it won’t happen tomorrow, but it will, you’ve got more clarity and so that will help as well. So just overall, as one of the reasons for our optimism in terms of where we think we are in the cycle is you are getting more clarity on these things that businesses can underwrite the best decisions.

Bascome Majors, Analyst, Susquehanna: Thank you for that. And also tying it back into sort of the sentiment and the fundamental sort of customer responses, we could see that come through in the next year. Just one last one from me, and I’ll pass it on. When you have an Investor Day target for margins for next year. I mean, if we start where we are this year, you’re a little below what you promised then, but but not massively, what, five to six versus seven to nine.

And, ultimately, it seems that the big delta is build rates and absorption. I think you promised, sorry, sort of had an outlook tied to 40,000 annual railcar deliveries on average, and, you know, we’re tracking 30,000 ish, give or take, right now for the industry. How do you level set sort of the 9% to 11% margin expectation from the Investor Day for next year looking out with with kinda where we are today and and maybe some improvement from that, but maybe not all the way back into that 40,000 plus range?

Gene Savage, Chief Executive Officer and President, Trinity Industries: Good question, Bascome. And you’re right. We did set out the 40,000 a year on average for the deliveries. The uncertainty that came into this year dropped that drastically about a 30% drop year over year. And with that, the volume has been the biggest impact that we’ve seen on our products margins.

When you look at recovery from that, as we see the volume go up, you will see the recovery in those margins. I think it’ll be quicker this time. And I’m saying that because of all the hard work that the products group has done over the last few years. They’ve worked on their efficiencies, their changeovers, the automation supply chain, all of that work, although it won’t come back overnight, will come back quicker than what you’ve seen in the past as we see the volume recovery. So when we get back to the 40,000, you’ll see it.

We think they’re deferring orders right now, depending on where they feel comfortable with the certainty in the macroeconomics and the tariffs is when we’ll start seeing that volume get closer to the 40 for the industry.

Bascome Majors, Analyst, Susquehanna: Thank you both.

Gene Savage, Chief Executive Officer and President, Trinity Industries: Thank you.

Conference Operator: Our next question comes from Andre Tomczak from Goldman Sachs. Please go ahead.

Andre Tomczak, Analyst, Goldman Sachs: Good morning, everybody. Thanks for taking my questions. Maybe just one quick one to follow-up on Bascome’s earlier question on the margins for the full year, the 5% to 6% in Manufacturing. Should we expect and I know you said improvement through the year, but should we expect to be below the low end of the range in the third quarter and ramp more into the fourth quarter? Or would you expect to be within that range through the second half?

Just to clarify there.

Gene Savage, Chief Executive Officer and President, Trinity Industries: So, don’t give quarterly guidance, Andre. So, sorry about that. But we are saying our full year guidance should be in the 5% to 6% range. So, you would have all four quarters going into that to get to the full year. We do expect to see volumes improve through the year.

Hopefully, that helps a little bit with you and business improve through the year.

Andre Tomczak, Analyst, Goldman Sachs: Nope, that makes sense. And I guess putting those pieces together, does the delivery picture in the back half then look more like that first quarter level? Or should we be thinking more between the two quarters? I’m just trying to get a sense for the full year deliveries relative to the total industry delivery guidance. Because I think you said 28,000 to 33,000.

If we come in at 28,000 and you guys maintain your market share that you did last year at 41, that would assume roughly 11,500 deliveries for you this year. I’m just curious if you can comment on the relative back half deliveries, if that’s looking closer to the first quarter, or if we should expect to ramp more into the fourth quarter. Any additional color there would be super helpful. Thank you.

Gene Savage, Chief Executive Officer and President, Trinity Industries: Sure. And you hit the key points. We do expect the industry deliveries to be between twenty eight and thirty three. We expect to be within our normal range of market share, which would be between that 3040%. And so you can back into the numbers there.

And as I say, the business improves through the year, which means the biggest improvement we’ll see is based off volume.

Andre Tomczak, Analyst, Goldman Sachs: Understood. Thank you. And maybe just switching to leasing. Could you speak a little bit more to the current competitive environment and what you’re seeing in terms of the secondary market perspective and lease rates? I know you said you should expect that to tick up into the second half, but any additional commentary into the quarter relative to the beginning of the year would be helpful as well.

Thank you.

Gene Savage, Chief Executive Officer and President, Trinity Industries: So the market is still very tight and in balance. And so that’s always great for a lease fleet. So we’re seeing good FLRD. We’re seeing that our renewal rate and success was 89% in the quarter. That’s the highest that we’ve seen for a while in that aspect.

I think all the metrics that we’re looking at are positive overall for the weekly. We don’t see anything that’s going to change that. As you can see from the build deliveries that they’re not outpacing the demand or the orders. That those are all good data points to say we expect leasing to continue to be strong. We’ve only repriced 63% of our fleet.

So we still have quite a bit left there to replace over the next few years. So all those indicators are positive in our viewpoint.

Eric Marketo, Chief Financial Officer, Trinity Industries: Yeah and Andres on the secondary market, I’ll just add that we see the market as still very good and it stands to reason with lower build rates, leasing companies really are going get your growth through the secondary market and we’re seeing that. And you may have caught in our comments on guidance, we did increase our gains on sale from 40 to 50 to 50 to 60 for the year, and that’s just that’s a testament to the how we see the secondary market.

Andre Tomczak, Analyst, Goldman Sachs: Yep, that makes sense. And then maybe just two sort of higher level questions. One for me to close out, the first one, is it on the tariff situation, I’m just curious, is it too simplistic to think higher steel prices could limit customer demand for new cars in the near term? Or is that does that sort of speak to the delayed decision making that you guys were talking about earlier? Just trying to think through that longer term.

And then if you could share any thoughts on the recent news on the potential transcontinental rail merge. If that were ultimately to go through, how do you see that impacting the leasing and manufacturing business or the industry overall? Thanks for the time, everybody.

Gene Savage, Chief Executive Officer and President, Trinity Industries: Thank you. So on higher steel pricing, it does mean that the car is going to be, costs are going be higher. But also, as you look at higher steel prices, that means scrap prices typically are higher too, which leads people to attrition. The first half of this year, 20,000 cars, just over 20,000 cars were scrapped. So the scrapping was higher than the deliveries.

So we saw a little bit of a contraction in the overall fleet. And at some point, that contraction is going to lead to having to order new cars. That’s what we’re saying. We’re seeing sentiments start to change there, and that’s with the steel prices already in effect for us. As far as the merger, when you look at it, from what we know right now, the interchange process does cause inefficiencies between the railroads.

And anything you can do to fix or improve those inefficiencies should help our customers overall and lead to better motel share. And if you look at what the synergies that have been called out for this merger are, two thirds of those are in revenue synergies from identified opportunities to grow volume. So they’re talking about converting truck to rail, capturing transcontinental shipments, and then penetrating deeper into international markets. All of those are good for us in the long term with modal share shift. So, that’s what we know right now.

We’ll keep watching to see if anything new comes out. But we think this could be good overall for the industry.

Andre Tomczak, Analyst, Goldman Sachs: Helpful color. Thank you, Gene and Eric. Appreciate it.

Gene Savage, Chief Executive Officer and President, Trinity Industries: Thank you. Thank you.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Gene Savage for any closing remarks.

Gene Savage, Chief Executive Officer and President, Trinity Industries: Thank you for joining us today. Trinity’s second quarter results highlight the strength of our leasing business and the resilience of our franchise. We’re encouraged by our ability to perform in a challenging delivery environment and are optimistic about the improving order volumes. This positive trend paves the way for enhanced operating environment and improved financial performance in the 2025.

Conference Operator: Conference has now concluded. Thank you for attending today’s presentation.

Gene Savage, Chief Executive Officer and President, Trinity Industries: You

Conference Operator: may now disconnect.

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