Dj Wabtec Stock Rises Friday, Outperforms Market

It has been about a month since the last earnings report for Westinghouse Air Brake Technologies (WAB). Shares have added about 4.7% in that time frame, outperforming the S&P 500.

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

Wabtec Q3 Earnings Surpass Estimates

WAB reported third-quarter 2024 earnings per share (excluding 37 cents from non-recurring items) of $2.00, which surpassed the Zacks Consensus Estimate of $1.87. The bottom line improved 17.6% year over year due to higher sales and operating margin expansion.

Revenues of $2.66 billion beat the Zacks Consensus Estimate of $2.64 billion. The top line grew 4.4% year over year due to higher sales of the Freight and Transit segments.

Segmental Highlights

Freight net sales of $1.93 billion increased 2.6% year over year. Results were boosted by the strong performance of Services and Digital, which rose 16.5% and 12.7%, respectively. The actual segmental sales figure was below our expectations of $1.97 billion.

Freight segment’s adjusted operating margin increased 2.9 points to 24.1%. Adjusted operating margin benefited from higher sales, improved gross margin and operating expenses.

In the Transit segment, net sales grew 9.6% year over year to $733 million due to strong aftermarket sales. The actual segmental sales figure was higher than our projections of $653 million. The segmental adjusted operating margin increased to 12.8% from 12.5% in the third quarter of 2023.

The adjusted operating margin increased 1.8 points to 19.7%. The operating margin benefited from higher sales and improved gross margins.

Total operating expenses in the reported quarter increased by $25 million to $447 million.

Wabtec exited the third quarter with cash, cash equivalents and restricted cash of $410 million compared with $595 million at the prior-quarter end. Long-term debt was $3.52 billion compared with $3.49billion at the second-quarter end.

During the reported quarter, WAB repurchased shares worth $599 million and paid $35 million in dividends.

2024 Guidance

Wabtec’s revenue guidance remains unchanged in the range of $10.25 billion-$10.55 billion. WAB now expects its 2024 adjusted EPS in the range of $7.45-$7.65. The previous guidance was in the range of $7.20-$7.50.

For 2024, management expects operating cash flow conversion to be greater than 90%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Wabtec has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wabtec has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Zacks Investment Research

Here are five stocks added to the Zacks Rank #1 (Strong Buy) List today:

Amphenol Corporation APH: This electronics manufacturing company has seen the Zacks Consensus Estimate for its current year earnings increasing 4.6% over the last 60 days.

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Westinghouse Air Brake Technologies Corporation WAB: This rail equipment and services provider has seen the Zacks Consensus Estimate for its current year earnings increasing 2% over the last 60 days.

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Alpine Income Property Trust, Inc. PINE: This real estate investment trust has seen the Zacks Consensus Estimate for its current year earnings increasing 3.1% over the last 60 days.

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You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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