Trinity Industries Shares Plunged: What You Need to Know (TRN)

Trinity Industries Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: According to Warren Buffett, there's no better indication of the health of the U.S. economy than the health of its train business. That's bad news for the U.S., and worse news for investors in railcar builder Trinity Industries (NYSE: TRN ) , which reported earnings last night ... and is down 10% today.

So what: Trinity earned $0.37 per share in the second quarter, or a penny shy of Wall Street's prediction. That was the bad news. The worse news is that in the current third quarter, Trinity is only promising to earn about $0.35 per share -- a full dime short of Street estimates.

Now what: In the best case scenario, Trinity now thinks it might finish up the year with $1.45 per share in profits. If that's how things play out, it would equate to a 22 P/E ratio on the stock -- a pretty penny to pay for 10% long-term growth. Worse still, Trinity warns it could earn as little as $1.35 per share this year. And did I mention the company also carries $2.5 billion in net debt -- a sum fully as big as its own market cap?

If you ask me, investors are doing exactly the right thing by selling off this overpriced maker of oversized Lionels. And I wouldn't advise hitching your fortunes to Trinity, either.

Disagree? Think this little engine still can? Add Trinity to your Watchlist and see if you're right.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

Fool contributor Rich Smith does not own (or short) shares of Trinity Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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