Description

"SHE'S A RAILROAD LADY"

Trinity Industries equity has declined sharply over the last year, the climactic sell off came when they anounced a significant decline in demand for new rail cars in North America about a week ago. Trinity has 6 business components, 1) Rail Cars, 2) Inland Barge, 3) Parts & Svcs, 4) Highway Constructions Products, 5) Concrete & Aggregates, 6) Industrial Group. The stock was as high as $54 in Q1 1999.

Rail car was 1.7B of the 2.7B in revs, so this is no doubt serious. But there is compelling value here: Total enterprise value of $1,032 mil is just 3.7X fiscal 2000 (ended 3/31) EBITDA of $269 Million. They bought back 2.9mm shares last year for $84.9 mm sporting an average cost of $29.7 per share. Currently they are authorized to buy back more which would be accretive.

The company does most of its busines in the Americas and has plans for further expansion outside this area. The balance sheet is strong and the company may use this cyclical downturn to make acquisitions.

It may be a little wait for an exit (I like at least 12 months anyway) but you are picking up a nearly 4% yield while you wait.

Catalyst

Back in April, Forbes ran an article on LBO King Jimmy Dean where the author cited TRN as a possible target. The company says they are not for sale but an LBO could be easily financed at these levels.