Earnings Report: Wabtec Delivers Robust Q3 with a 4.5% Increase in Sales

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Earnings Report: Wabtec Delivers Robust Q3 with a 4.5% Increase in Sales

Wabtec Corporation (NYSE: WAB) announced a robust performance in its third-quarter earnings release, reporting a 4.5% increase in sales compared to last year, reaching $2.7 billion. The company, operating in freight and transit sectors, experienced growth in both segments, with adjusted earnings per share (EPS) rising approximately 18% year-over-year to $2.00. Wabtec's order backlog increased by 7.5% to $7.6 billion, and its total multi-year backlog was reported at $22 billion.

Key Highlights:

  • Sales increased by 4.5% to $2.7 billion, with growth in Freight and Transit segments.
  • Adjusted EPS rose by 18% year-over-year to $2.00.
  • Operating cash flow remained strong at $542 million.
  • 12-month backlog rose to $7.6 billion and multi-year backlog reached $22 billion.
  • Significant contracts include agreements with Kazakhstan's KTZ and Siemens Mobility.
  • Adjusted EPS guidance for 2024 was raised to a range of $7.45 to $7.65.

Company Outlook:

  • Mixed outlook for the freight business, with strong international markets.
  • Revised North American railcar production forecast to 41,000 for 2024.
  • Full-year adjusted EPS guidance increased, reflecting a 27.5% rise at the midpoint.
  • Expectation for mid-single-digit organic growth and double-digit EPS growth through 2025.

Negative Highlights:

  • $18 million restructuring cost from Integration 2.0 initiative.
  • North American railcar forecast revised from 45,000 to 41,000.
  • Decline in service revenues due to changes in production mix.

Positive Highlights:

  • Strong international demand, particularly in markets like Africa and Kazakhstan.
  • $405 million locomotive order added to the backlog.
  • Ongoing portfolio optimization efforts anticipated to yield significant savings.

Misses:

  • No specific shortfalls reported during the earnings announcement.

Q&A Highlights:

  • International margins vary by contract, with strong growth anticipated.
  • Shift towards production modifications expected to reverse in the upcoming quarter.
  • Focus on acquisition and merger opportunities in digital sector and adjacent areas.

Wabtec CEO Rafael Santana and CFO John Olin emphasized the company's financial stability and strategic initiatives. Freight segment sales increased by 2.6%, while adjusted operating income rose by 17.6% year-over-year. Transit segment sales climbed 9.6%, with a 10.8% increase in backlog. Share repurchases totaled $599 million, and dividends paid amounted to $35 million. Liquidity remained robust at $1.9 billion, with a net debt leverage ratio improvement to 1.7x.

Executives expressed satisfaction with progress, particularly in streamlining operations and improving margins. Despite expecting variability in quarterly results due to project timing, they are confident in the continued profitable growth of the Wabtec Transit sector and the increasing profitability of the backlog. They remain focused on sustainable margin expansion through organic growth, acquisition and merger opportunities, and continuous improvement initiatives. The statement concluded with optimism about Wabtec's future performance.

InvestingPro Forecasts: Wabtec Corporation's strong third-quarter performance is further supported by data from InvestingPro. The company has a market capitalization of $32.66 billion, reflecting its significant presence in the freight and transit sectors.

One notable InvestingPro Insight is Wabtec's uninterrupted dividend payments for 30 years, demonstrating its long-term return commitment to shareholders. This aligns with the company's reported financial health and strong operating cash flow of $542 million.

InvestingPro's reported 13.67% revenue growth over the last twelve months supports the 4.5% sales increase noted in the earnings release. Furthermore, 28.99% EBITDA growth during the same period indicates improved operational efficiency, consistent with the company's focus on streamlining operations and margin improvement.

Another significant InvestingPro Insight is that Wabtec is trading close to its 52-week high, with its price at 97.44% of the 52-week high, reflecting investor confidence in the company's performance and outlook, bolstered by the raised EPS guidance for 2024.

It is noteworthy that InvestingPro identified 13 additional tips for Wabtec, offering investors comprehensive analysis of the company's financial health and market position.

A price-to-earnings ratio of 32.54 indicates that investors are willing to pay a premium for Wabtec's earnings, likely due to its strong market position and growth prospects. However, a PEG ratio of 0.63 suggests the stock may be undervalued relative to its earnings growth potential.

Investors looking for deeper analysis on Wabtec can explore these metrics and more on InvestingPro, which offers rich additional insights to inform investment decisions.