Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Trinity Industries Inc (TRN), Flowserve Corporation (FLS), Cummins Inc. (CMI): Three Companies For Industrial-Sized Returns

Trinity Industries, Inc. (NYSE:TRN)The global industrial machinery market will reach $514 billion by 2015, growing by 7.2% annually. The industry is showing signs of improvement with increasing economic activities, which in turn increase the demand for industrial equipment. However, the rising cost of raw materials and environmental regulations are a challenge for this industry. This article analyzes three industrial companies adopting different strategies like new products, entering into a joint venture, and signing new contracts to keep pace with industry growth.

Joint venture with growth in rail group segment

On May 7, Trinity Industries Inc (NYSE:TRN) entered into a joint venture with Napier Park Railcar Lease Fund and its co-investors to form Rail Holdings. In this joint venture, Trinity Industries Inc (NYSE:TRN) will own 31%, while Napier and its investors will have a 69% interest. The joint venture will provide railcar leasing services in North America. RIV will acquire approximately $1 billion of rail cars from Trinity Rail Group and Trinity Industries Inc (NYSE:TRN) leasing company. The joint venture provides opportunities for Trinity Industries Inc (NYSE:TRN) to grow its leasing platform by reducing capital investment, which is required by a growing lease fleet.

Napier and its co-investors also purchased 55% interest in TRIP Rail holdings, reducing Trinity’s holdings from 73% to 45%. These transactions will generate cash of $575 million – $625 million to Trinity Industries Inc (NYSE:TRN) by the end of 2014, with $175 million already received. Trinity Industries Inc (NYSE:TRN) has the modest dividend pay-out ratio of 8.80%, which should increase in the coming quarters.

The company’s rail group segment will show strong performance this year due to increasing orders for railcars. This segment reported revenue of $625 million in the first quarter ended March, representing growth of 33.9% year-over-year. The revenue was driven by railcar deliveries totaling 5,230 units at an average sale price of $120,000. In the future, the company will benefit from its order backlog, as it had 42,265 rail car orders at the end of the first-quarter. The company will deliver 22,000 rail car units this fiscal year. Therefore, revenue from this segment will rise to $2.6 billion this year compared to $2 billion last year.

New product and capital deployment

On May 1, Flowserve Corporation (NYSE:FLS) announced the launch of its new Limitorque UEX electronic control package for L120 series actuators. Actuators are a type of motor for moving or controlling a system operated by a source of energy like electrical current. The new UEX provides customers expanded features and will include liquid crystal displays, or LCDs, that will provide actuator set up by displaying continuous position indications and fault conditions.

The company is expanding worldwide. It won a multi-million dollar contract from M.N Larnaca Desalination in April to provide a complete pump package and energy recovery devices. Additionally, it will have a few other large deals. New product innovation will help the company meet customers’ expectations and will enhance its revenue in the coming quarters. With the help of the new addition to its Limitorque product line, its revenue is expected to rise to $4.91 billion this year and $5.23 billion next year compared to $4.75 billion last year.

On May 23, Flowserve Corporation (NYSE:FLS) announced an increase in quarterly dividend from $0.36 per share to $0.42 per share, indicating growth of 16.7%. The company has a strong history of returning cash to shareholders in the form of share buybacks and dividends. It has paid a quarterly dividend for the past 23 years, increasing the dividend every year. In the first quarter, it announced the share repurchase plan of $750 million. This includes around $193 million of a previously announced buyback of $1 billion. This additional buyback will uplift its share price in the future.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.