Strong second-quarter results drive Wabtec momentum

Key points

• Q2 2024 sales increased 9.8% year-over-year to $2.64 billion.
• Diluted GAAP earnings per share increased 54.7% to $1.64.
• The company raised its adjusted earnings per share (EPS) guidance for 2024 to a range of $7.20 to $7.50 (up 24% at the midpoint).

Manufacturer of locomotives and transit systems Westinghouse Air Brake Technologies (WAB 0.70%) (Wabtec) on Wednesday reported second-quarter 2024 results that confirmed strong performance. Sales rose nearly 10% to $2.64 billion, driven by solid growth in the Freight segment. Diluted GAAP earnings per share (EPS) rose 54.7% year over year to $1.64, while adjusted EPS rose 39% to $1.96.

These results exceeded the management’s previous expectations, confirming the company’s positive forecasts for the financial year.

Source: Wabtec. Note: Management’s Q2 guidance was provided on April 24, 2024. YOY = year-over-year.

About Wabtec

Westinghouse Air Brake Technologies, commonly known as Wabtec, specializes in innovative solutions for freight and transit systems. The company’s primary business segments include freight and transit. The company focuses on providing high-margin aftermarket services and implementing advanced technologies such as battery-powered and hydrogen-powered locomotives.

Recent strategies emphasize investments in sustainable technologies and digital transformation, key success factors that have fueled the company’s growth. Strategic acquisitions such as Faiveley Transport and GE Transportation continue to play a key role in expanding Wabtec’s market presence and technological capabilities.

Key results for Q2

Wabtec’s second quarter of 2024 saw strong financial results. The Freight segment led the growth with sales up 13.1% year over year to $1.92 billion, while the Transit segment posted a modest 2% increase to $724 million.

GAAP gross margin for the quarter increased to 33% from 30.1% in Q2 2023, benefiting from higher sales volumes and effective cost management. Operating margins also saw significant growth, with GAAP operating margin increasing to 16.3% and adjusted operating margin increasing to 19.3%.

Strong sales growth and margin improvement were the main drivers of Wabtec’s earnings per share growth. Cash flow from operations in the second quarter of 2024 also increased to $235 million compared to $115 million in the same period last year, reflecting improved operating performance.

The Transportation segment stood out, with GAAP gross margin increasing from 31.8% to 34.8% and adjusted operating margin improving from 20.3% to 24.1%. This growth was driven by strong demand in the Equipment and Components segment, which increased 36.4% and 17.5% year over year, respectively.

Meanwhile, the public transportation segment, while smaller compared to freight, saw its GAAP gross margin increase from 26% to 28.3%, and its adjusted operating margin increased from 11.1% to 12.7%. The growth in this segment was primarily due to growth in aftermarket sales, which typically generate higher margins and are less sensitive to economic cycles.

Wabtec also reported solid growth in its 12-month backlog, which increased 1.6% to $7.334 billion, providing improved revenue visibility. However, the total backlog saw a slight decrease of 1.6% to $22.1 billion due to schedule and order fluctuations.

Looking to the future

Based on strong Q2 2024 results, Wabtec raised its full-year adjusted EPS guidance to a range of $7.20 to $7.50, representing an increase of approximately 24% over 2023 mid-year. Revenue guidance remains unchanged at $10.25 billion to $10.55 billion. Management expects operating cash flow conversion to be above 90% for the full year.

Investors should keep an eye on Wabtec’s ongoing efforts to develop sustainable technologies and its strategic moves in the Freight and Transit segments. Wabtec said it intends to maintain its growth trajectory while managing potential risks, such as regulatory changes and market volatility.

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