This Transport Stock Could Surge Another 25% By Year End

If you drove a car to work or turned up the thermostat in your home today, then it’s a safe bet that the fossil fuels used to power these tasks came to you via railway. And there’s also a good chance that if it was shale oil at the source of these fuels, then it came to you via Trinity Industries (NYSE: TRN).

#-ad_banner-#Trinity supplies products and industry services for the energy, transportation, chemical and construction sectors in the United States, Canada and Mexico. It also has operations in the U.K., Singapore and Sweden.

The company’s bread-and-butter operation is its railcar business. Trinity has a lease fleet of more than 73,500 railcars used in transporting shale oil from the northern United States and Canada to the rest of an energy hungry continent. Last year, Trinity’s railcar sales and leasing segment was responsible for more than 60% of the company’s operating profits. 

This year, the company continues to deliver outstanding gains in revenue, earnings and share price.

In late July, Trinity reported Q2 earnings that trounced Wall Street expectations, with a 95% increase in net income to $164.2 million. That translated into earnings of $1.01 per share, while estimates called for EPS of just $0.77. The company saw a 39% year-over-year increase in revenue in the quarter, reporting sales of $1.5 billion, also beating estimates. 

The second-quarter numbers were impressive, and they come after an even stronger Q1. TRN saw a 57% surge in revenue in the first quartered compared with average revenue growth of just 6.5% for the rail industry. 

As you might expect given Trinity’s powerful top- and bottom-line growth, as well as the fact that the company is perfectly positioned to continue profiting from the North American shale oil boom, investors have taken note and driven the stock markedly higher.

Over the past 12 months, TRN has delivered remarkable gains of 114%. After a brief pullback in early August that came largely on wider selling in the market, TRN continued to power to new highs. 

Over the past month, shares are up almost 12%, but recent selling is giving traders a great buying opportunity. TRN now sits 6% below its Sept. 3 high, and I think it is set to deliver more profits to shareholders…

Trinity’s strong fundamental record, especially over the past two quarters, as well as its outstanding share price performance during the past year, should be reason enough to put this transportation star on your buy list. 

However, it’s the likelihood of a continued strong demand for shale oil and Trinity’s massive market position in the railcar shipping segment (it accounted for about 47% of total shale shipments) that I suspect will keep the smart money flowing into TRN for months to come. 

Additionally, we’ve seen an increase in the number of railcar accidents over the past year, which isn’t surprising considering the increased amount of shale oil shipments. In response, regulators have introduced new guidelines for railcars that require retrofitted safety upgrades on existing railcars, as well as new safety specifications of new railcars.

That’s good for Trinity, because it’s going to get an influx of orders over the next several years from transporters that need to comply with the enhanced regulatory guidelines. And, to deal with this influx, Trinity just announced that it would begin ramping up railcar production by reopening an existing production facility in Georgia. 

Recommended Trade Setup: 

— Buy TRN at the market price
— Set stop-loss approximately 8% below entry price
— Set initial price target at $59.25 for a potential 25% gain in three months

Trinity Industries currently sports an Alpha Score of 128. If you’re not familiar with the Alpha Score, it’s an indicator that can flag which stocks are likely to jump double- or triple-digits in the coming weeks or months. It’s already flagged 71 stocks that gained 10% or more in just two weeks. You can learn more about the Alpha Score and get the name of a stock flashing “buy” now here.

This article was originally published by ProfitableTrading under the title: Money-Doubling Transport Stock Could Surge Another 25% by Year End