What happened
Shares in railcar leasing and railcar products company Trinity Industries(NYSE: TRN) were down by 12.3% on the week to Thursday morning. The move comes after management announced that its third-quarter railcar deliveries would come in at 4,325 units, compared to management's target of 5,010 units.
The reason comes down to the closing of a US/Mexico border crossing by the U.S. Customs and Border Protection Agency. Moreover, management said its supply chain was affected by "state vehicle inspections," resulting in "truck traffic congestion." In addition, both railcar deliveries and its supply chain will suffer until the "the congestion is resolved."
The border in question is at Eagle Pass, Texas, which is the main crossing Trinity uses for railcar deliveries from its manufacturing facilities in Mexico.
So what
Cross-border rail traffic was suspended at Eagle Pass on Sept. 20, then reopened a few days later on Sept. 23. However, there is substantial congestion, and investors must wait until the third-quarter earnings call on Nov. 2 before hearing management's estimate of the potential financial impact.
Image source: Getty Images.
Now what
It's an unfortunate incident, but few deny the critical importance of securing the US border. That said, it looks likely to prove a temporary matter as rail traffic is flowing again, albeit with "substantial congestion and rail traffic challenges," according to Trinity's press release. If the disruption proves short-lived, then investors can expect Trinity to play catch-up on deliveries in the coming quarters. With a dividend yield near 4.5%, the stock will interest income-seeking investors.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
