Wabtec (WAB) Shares Down 3.1% Since Last Earnings Report: Is A Rebound Possible?

A month has passed since the last earnings report for Westinghouse Air Brake Technologies (WAB). Shares have lost about 3.1% in that time, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Wabtec poised for a breakout? Before we dive into how investors and analysts have reacted lately, let’s take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Wabtec’s first-quarter earnings beat estimates

Wabtec’s earnings (excluding 33 cents from non-recurring items) came in at $1.13 per share, missing the Zacks Consensus Estimate of $1.14. Financial performance improved 27% year-over-year, led by margin growth of 1.4 percentage points to 16.5% and higher revenues of 5.29% to $1,927 million, despite supply chain disruptions. However, the top line missed the Zacks Consensus Estimate of $1,971.6 million.

Total operating expenses in the reported quarter increased 4.1% year-over-year to $356 million, primarily due to an 18% increase in engineering costs and a 1.7% increase in selling, general and administrative expenses. The operating ratio (operating expenses as a percentage of revenue) deteriorated 30 basis points compared to the prior-year quarter to 18.4%. During the quarter, WAB repurchased 3.1 million shares for $296 million.

Segment highlights

Freight net sales increased 11.7% to $1,322 million. Results were boosted by positive demand for freight services, components and equipment, as well as the acquisition of Nordco. Segment operating margin (adjusted) increased to 19.6% from 18.1% in the prior-year quarter.

In the Transit segment, net sales declined 6.5% to $605 million due to supply chain issues, COVID-related disruptions and unfavorable foreign exchange. Adjusted segment operating margin improved from 12.2% to 12.3%.

Balance sheet data

As of March 31, 2022, Wabtec had cash and cash equivalents of $488 million, compared to $473 million at the end of 2021. In the March quarter, WAB generated cash from operations of $161 million.

Long-term debt at the end of the quarter was $4,225 million compared to $4,056 million at the end of 2021.

Confirmation of guidelines for 2022

Wabtec confirms sales in the range of USD 8.3-8.6 billion. Adjusted earnings per share are still estimated in the range of $4.65-$5.05. Wabtec continues to expect strong cash flow generation, with operating cash flow conversion exceeding 90%.

How have estimates changed since then?

It turns out that over the past month, estimates have shown an upward trend.

VGM results

At this point, Wabtec has a nice Growth Score of B, a grade with the same rating on the momentum front. Plotting a somewhat similar path, the stock received a grade of C on the Value page, putting it in the middle 20% for this investment strategy.

Overall, the stock has a Composite VGM Score of B. If you’re not focused on a single strategy, this rating should interest you.

Perspectives

Estimates for this company generally show an upward trend, and the scale of these adjustments was net zero. Notably, Wabtec carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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