Trinity Industries' (NYSE:TRN) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Investors were disappointed by Trinity Industries, Inc.'s (NYSE:TRN ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Trinity Industries' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from US$60m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If Trinity Industries doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Trinity Industries' Profit Performance

We'd posit that Trinity Industries' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Trinity Industries' statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Trinity Industries as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Trinity Industries you should be mindful of and 2 of them are concerning.

Today we've zoomed in on a single data point to better understand the nature of Trinity Industries' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.