When an analyst initiates or upgrades a stock and accompanies that recommendation with a long-term positive outlook, it usually means good things are ahead for investors. When multiple analysts initiate coverage on a stock there's usually a significant reason why. With that said, I wanted to focus on two diversified machinery stocks that were initiated with new coverage in the last 24 hours and some of the variables long-term growth investors should consider.
Trinity Industries Inc. (TRN) had its coverage initiated by both Stephens and UBS AG on Monday. Stephens rated the company an "Equal Weight" and set a $32.00/share price target on the stock, while UBS rated the company a "Buy" and set a $38.00/share price target. According to Yahoo Finance, the Dallas, Texas-based firm
provides products and services to the industrial, energy, transportation, and construction sectors primarily in the United States, Canada, Mexico, the United Kingdom, Singapore, and Sweden. The company's Rail Group manufactures and sells railcars, including auto carrier, box, gondola, hopper, intermodal, specialty, and tank cars; and railcar components, such as couplers and axles. This group also offers repair and coating services.
I think that the continued development of the company's Rail Group and the company's continued efforts to grow internationally are going be key factors when it comes to the success of TRN. However, investors should also examine the company's earnings history over the last four quarters. In the last 12 months, TRN has surpassed analyst estimates by an average of 19.20%, whereas direct competitor Union Pacific (UNP) has only managed to surpass estimates by 6.98%.
According to recent comments made by Raymond James analyst Arthur Hatfield:
The inland barge division should get a boost from "many of the same fundamental trends and the market for barges and railcars in the transportation of natural gas seems stronger than he expected, and Trinity will benefit from the slow development or cancellation of natural gas pipelines.
New Oriental Education & Technology Group (EDU) had its coverage initiated by both Deutsche Bank and JG Capital on Monday. Deutsche Bank rated the company a "Buy" set a $24.00/share price target on the stock, while JG Capital rated the company an "Overweight" and set a $24.00/share price target. According to Yahoo Finance, the Beijing, China-based firm
provides private educational services primarily in China. The company offers language training courses that consist of various types of English language training courses, as well as training courses for other foreign languages, including German, Japanese, French, Korean, and Spanish; and test preparation courses for language and entrance exams used by educational institutions in the United States, the People's Republic of China, and the Commonwealth countries.
According to JagsReport.com, an analyst at JG Capital had noted,
EDU is the best way to play the growth in China's private education market. Now that the SEC has found no objections in EDU's reporting structure, we think EDU's stock price is poised for a significant recovery. We think EDU will continue to benefit from the overall economic growth and the demand for high-quality private education and English language training in China. We initiate coverage on EDU with an Overweight rating and a price target of USD $24.00, which equates to a P/E of 16x our EPS estimates of $1.49.
The good thing about EDU is the fact that not only have fraud allegations subsided, but the company seems to be headed in the right direction. If the demand for high-quality private education continues to grow at rates which surpass analysts estimates, we could easily see EDU overtake the $24.00/share price target JG Capital has set.
Potential investors looking to establish a position in either TRN or EDU should do so with a small to moderate position and add to that position as both companies' developments begin to enhance bottom line numbers. TRN and EDU have very promising potential, especially when it comes to earnings. But I'd still remain cautious in case economic growth slows in both the U.S. and China.