The Dallas-based company increased its outlook for the quarter to $0.35 to $0.42 from $0.25 to $0.32. In addition, Trinity forecasted that revenue for the quarter would exceed $700 million. If the guidance holds, it would mean that Trinity's year-over year EPS jumped by at least 483% while revenue rose 27.6%.
To some extent, the bump in the guidance is no surprise. Railroads like Genesee & Wyoming
Unfortunately, Trinity's balance sheet has suffered in the midst of the boom. In the first quarter, cash and equivalents declined by 37.6%, to $113.7 million, compared with last year. Debt, meanwhile, rose more than 10% to $570.2 million. It's pretty easy to trace the source of the slumping cash position. Though Trinity's bottom line improved steadily from 2002 to 2004, its cash-generating ability suffered as the firm ramped up inventory levels to meet demand. Cash from operations crashed from positive $120.7 million in 2002 to negative $82.6 million in 2004; in the first quarter, Trinity again bled cash, although the $59.2 million used in operations was an improvement from the $71.7 million used in the same period last year.
While Trinity's improving earnings profile is certainly a positive, the income statement is clearly only part of the story. Trinity is not in any immediate danger; it has access to a $350 million credit facility. But investors should keep a close watch to make sure the firm doesn't overextend itself.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.