Wabtec (WAB) Up 3.9% Since Last Earnings Report: Can This Continue?

It has been about a month since Westinghouse Air Brake Technologies (WAB) last reported earnings. Shares have risen about 3.9% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Wabtec headed for a decline? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to better understand the important catalysts.

Wabtec’s first-quarter earnings beat estimates

Wabtec reported first-quarter 2024 earnings (excluding 36 cents from non-recurring items) of $1.89 per share, beating the Zacks Consensus Estimate of $1.49. The financial result improved by 47.66% year-on-year thanks to higher sales.

Revenues of $2.50 billion surpassed the Zacks Consensus Estimate of $2.35 billion. Revenues increased 13.81% year over year due to higher sales of the Freight and Transit segments.

Total operating expenses increased by $14 million to $403 million in the reported quarter. The operating ratio (operating expenses as a percentage of revenues) improved to 16.2% from 17.7% in the same quarter last year. A lower metric value is preferred.

Adjusted operating margin increased 3.4 points to 19.8%. Operating margin benefited from higher sales and improved price/mix and productivity.

In March, WAB generated cash from operations of $334 million, compared to cash from operations of $25 million a year earlier. The improvement was due to higher earnings and better working capital management.

WAB ended the quarter with cash, cash equivalents and restricted cash of $639 million and total debt of $4 billion. In the first quarter of 2024, WAB’s total available liquidity was $2.13 billion. WAB bought back shares for $175 million in March, in addition to paying a dividend worth $36 million.

Segment highlights

Net merchandise sales of $1.8 billion exceeded our expectations of $1.7 billion. The results were reinforced by the good performance of equipment and services. The operating margin on freight increased to 20.2% from 14.5% in the first quarter of 2023.

In the Transit segment, net sales increased 5.5% year-over-year to $673 million, driven by strong aftermarket sales. Actual segment sales were higher than our forecast of $659 million. Segment-adjusted operating margin decreased to 12.7% from 12.9% in Q1 2023.

Guidelines 2024

Wabtec currently expects sales in the range of $10.25 billion to $10.55 billion. Previous guidance was in the $10.05-10.35 billion range. Adjusted earnings per share are currently estimated to be between $7.00 and $7.40. Management anticipates strong cash flow generation, with operating cash flow conversion exceeding 90%.

How have estimates changed since then?

Over the past month, investors have seen an upward trend in new estimates.

As a result of these changes, the consensus estimate moved by 8.29%.

VGM results

At this point, Wabtec has an average Growth Score of C, although it lags slightly behind its Momentum Score of D. Plotting a somewhat similar path, the stock is rated F on the Value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has a Total VGM Score of D. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for the stock are trending upwards, and the scale of these revisions looks promising. It’s no surprise that Wabtec has a Zacks Rank #1 (Strong Buy). We expect an above-average rate of return on shares in the coming months.

Industry player performance

Wabtec belongs to the Zacks Transportation – Equipment & Leasing industry. Another stock in the same industry, Gatx (GATX), has gained 5.5% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2024.

In the most recent quarter, Gatx reported revenue of $379.9 million, representing a year-over-year change of +12.1%. EPS of $2.01 for the same period compared to $2.20 a year earlier.

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