This infrastructure company topped Wall Street’s estimates by 17 cents in the latest quarter. Shares are trading at a P/E of less than 7, and the stock pays a small dividend.
Trinity Industries (TRN)
from The Complete Investor
We’ve devoted a lot of ink to the world’s need for infrastructure. Virtually every major country around the globe can measure its infrastructure requirements in trillions of dollars. Even a country as developed as the U.S. has a multi-trillion-dollar need for new highways, a smart electrical grid, refurbished water pipes—which might make desalination a feasible solution to droughts anywhere in the country—and improved barges that potentially could cut transportation costs dramatically.
The American Society of Civil Engineers estimates the U.S. needs to spend more than $3 trillion in the next few years to get our infrastructure to a reasonably acceptable level. And while this includes upgrading our electric grid, it doesn’t cover creating the kind of smart grid that can handle energy from all sources including renewables, and it largely excludes spending on energy production.
The need for infrastructure—which also has the potential to generate a lot of growth and jobs—is one of the few things Republicans and Democrats actually agree on, making it a decent bet that Congress, whether during this Administration or the next, will ultimately pass a major infrastructure-spending bill. (Until then, though, expect to dig a bit deeper into your pocket at the tollbooth. Of all the major infrastructure categories, highways require the greatest expenditures, and the states can’t wait for Washington to act.)
Most stocks benefiting from greater infrastructure spending are major multinationals. Trinity Industries (TRN) is an exception. Its products and services are dedicated to the U.S., while it still has one of the most diversified infrastructure product lines of any company, big or small. Trinity’s major business is the manufacture and leasing of railcars. But it also is a leading provider of construction materials such as cement, concrete, and sand; a manufacturer of barges; a provider of highway products; and a leading North American producer of wind towers. In other words, this is a company strongly leveraged to gains in U.S. infrastructure spending of almost any kind.
The downside for growth investors is that Trinity tends to be cyclical—sometimes highly cyclical. But its compelling value credentials, which include a projected free-cash-flow yield of nearly 10%, a single-digit current P/E, and relatively low price to book, make it a terrific bet on increased infrastructure spending in this country. In the next 12 months or so the stock could easily test or exceed its previous highs of 50. And beyond 2016-17, if America really gets serious about what it needs to do, Trinity could emerge as a major market leader.
Stephen Leeb, PhD. and Genia Turanova, The Complete Investor, www.completeinvestor.com, 866-833-2070, May 2015