Here's Why Investors Should Retain Canadian Pacific KC Stock

Investors interested in Transportation stocks should always be looking to find the best-performing companies in the group. Has United Airlines (UAL) been one of those stocks this year? A quick glance at the company's year-to-date performance in comparison to the rest of the Transportation sector should help us answer this question.

United Airlines is a member of the Transportation sector. This group includes 135 individual stocks and currently holds a Zacks Sector Rank of #10. The Zacks Sector Rank considers 16 different groups, measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group.

The Zacks Rank is a proven system that emphasizes earnings estimates and estimate revisions, highlighting a variety of stocks that are displaying the right characteristics to beat the market over the next one to three months. United Airlines is currently sporting a Zacks Rank of #2 (Buy).

The Zacks Consensus Estimate for UAL's full-year earnings has moved 6.2% higher within the past quarter. This signals that analyst sentiment is improving and the stock's earnings outlook is more positive.

Based on the most recent data, UAL has returned 117.6% so far this year. In comparison, Transportation companies have returned an average of 4.8%. As we can see, United Airlines is performing better than its sector in the calendar year.

One other Transportation stock that has outperformed the sector so far this year is Westinghouse Air Brake Technologies (WAB). The stock is up 56.7% year-to-date.

The consensus estimate for Westinghouse Air Brake Technologies' current year EPS has increased 2% over the past three months. The stock currently has a Zacks Rank #1 (Strong Buy).

Looking more specifically, United Airlines belongs to the Transportation - Airline industry, which includes 31 individual stocks and currently sits at #14 in the Zacks Industry Rank. Stocks in this group have gained about 35.4% so far this year, so UAL is performing better this group in terms of year-to-date returns.

Westinghouse Air Brake Technologies, however, belongs to the Transportation - Equipment and Leasing industry. Currently, this 9-stock industry is ranked #18. The industry has moved +47.3% so far this year.

Investors with an interest in Transportation stocks should continue to track United Airlines and Westinghouse Air Brake Technologies. These stocks will be looking to continue their solid performance.

Zacks Investment Research

It doesn't matter if you're a growth, value, income, or momentum-focused investor -- building a successful investment portfolio takes skill, research, and a little bit of luck.

But how do you find the right combination of stocks? Funding your retirement, your kids' college tuition, or your short- and long-term savings goals certainly requires significant returns.

Enter the Zacks Rank.

What is the Zacks Rank?

The Zacks Rank, which is a unique, proprietary stock-rating model, employs earnings estimate revisions, or changes to a company's earnings expectations, that makes building a winning portfolio easier.

There are four main factors behind the Zacks Rank: Agreement, Magnitude, Upside, and Surprise.

Agreement is the extent to which all brokerage analysts are revising their earnings estimates in the same direction. The greater the percentage of analysts revising their estimates higher, the better chance the stock will outperform.

Magnitude is the size of the recent change in the consensus estimate for the current and next fiscal years.

Upside is the difference between the most accurate estimate, which is calculated by Zacks, and the consensus estimate.

Surprise is made up of a company's last few quarters' earnings per share surprises; companies with a positive earnings surprise are more likely to beat expectations in the future.

Each one of these factors is given a raw score that's recalculated every night, and then compiled into the Zacks Rank. Using this data, stocks are classified into five groups, ranging from "Strong Buy" to "Strong Sell."

The Power of Institutional Investors

The Zacks Rank also allows individual investors, or retail investors, to benefit from the power of institutional investors.

These professionals manage the trillions of dollars invested in hedge funds, mutual funds, and investment banks, and studies have shown that they can and do move the market because of the large amounts of money they invest with. Thus, the market tends to move in the same direction as institutional investors.

In order to determine the fair value of a company and its shares, institutional investors design valuation models that focus on earnings and earnings estimates. Because if you raise earnings estimates, it then creates a higher fair value for a company and its stock price.

With these changes, institutional investors will act, usually buying stocks with rising estimates and selling those with falling estimates. An increase in earnings expectations can potentially lead to higher stock prices and bigger gains for the investor.

Retail investors who get in at the first sign of upward revisions have a distinct advantage over larger investors since it can often take weeks, if not months, for an institutional investor to build a position. They'll also benefit from the expected institutional buying that could follow.

Not only can the Zacks Rank help you take advantage of trends in earnings estimate revisions, but it can also provide a way to get into stocks that are highly sought after by professionals.

How to Invest with the Zacks Rank

The Zacks Rank is known for transforming investment portfolios. In fact, a portfolio of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 32 years, with an average annual return of +25.41%.

Moreover, stocks with a new #1 (Strong Buy) ranking have some of the biggest profit potential, while those that fell to a #4 (Sell) or #5 (Strong Sell) have some of the worst.

Let's take a look at

Westinghouse Air Brake Technologies (WAB)

, which was added to the Zacks Rank #1 list on November 14, 2024.

Westinghouse Air Brake Technologies Corporation provides value-added, technology-based locomotives, equipment, systems and services for the freight rail and passenger transit industries, as well as in the mining, marine and industrial markets, across the globe. WAB's products are intended to enhance safety, improve productivity and reduce maintenance costs for customers. The company's products can be seen on most locomotives, freight cars, passenger transit cars and buses around the globe.

Four analysts revised their earnings estimate higher in the last 60 days for fiscal 2024, while the Zacks Consensus Estimate has increased $0.15 to $7.61 per share. WAB also boasts an average earnings surprise of 9.5%.

Analysts are expecting earnings to grow 28.6% for the current fiscal year, with revenue forecasted to rise 7.5%.

Additionally, WAB has climbed higher over the past four weeks, gaining 4.8%. The S&P 500 is up 3.1% in comparison.

Bottom Line

With a #1 (Strong Buy) ranking, positive trend in earnings estimate revisions, and strong market momentum, Westinghouse Air Brake Technologies should be on investors' shortlist.

If you want even more information on the Zacks Ranks, or one of our many other investing strategies, check out the Zacks Education home page.

Discover Today's Top Stocks

Our private Zacks #1 Rank List, based on our quantitative Zacks Rank stock-rating system, has more than doubled the S&P 500 since 1988. Applying the Zacks Rank in your own trading can boost your investing returns on your very next trade. See Today's Zacks #1 Rank List >>

Zacks Investment Research

Wabtec Corporation (WAB) is strengthening its operations with strategic acquisitions. To this end, Wabtec announced the acquisitions of Fanox and Kompozitum. Wabtec is purchasing the two companies for a $110 million cash transaction, financed through cash on hand and a revolving credit facility.

The two companies will join Wabtec’s Transit business (which recently reported third-quarter 2024 net sales of $733 million, up 9.6% year over year due to strong aftermarket sales. The segmental adjusted operating margin increased to 12.8% from 12.5% in the third quarter of 2023).

Pascal Schweitzer, president at Wabtec Transit, stated, “We are excited about bringing the capabilities of Fanox and Kompozitum to our Transit Business. These acquisitions align with our strategy by bringing in technologies that are complementary to our product portfolio, positioning the business for accelerated, profitable revenue growth. It also enhances Wabtec’s mission to provide our customers with next-generation solutions that improve efficiency, performance, and reliability.”

How Will Wabtec Benefit?

The inclusion of Fanox and Kompozitum is expected to be immediately accretive to WAB’s earnings, excluding transaction costs. Additionally, they are likely to enhance WAB’s potential, product portfolio and customer base.

The buyout of Fanox should boost Wabtec’s existing capabilities in the production of relays for on-board train operations and other industrial applications. This is expected to increase customer base and recurring revenues.

The purchase of Kompozitum is likely to strengthen Wabtec’s pantograph portfolio and open new oppurtunities for its carbon and graphite solutions.

WAB’s Zacks Rank & Price Performance

Wabtec currently carries a Zacks Rank #2 (Buy).

WAB shares have gained 57% so far this year, outperforming its industry and the S&P 500, of which the company is a key member.

YTD Price Comparison

Investors interested in stocks from the Transportation - Equipment and Leasing sector have probably already heard of Greenbrier Companies (GBX) and Westinghouse Air Brake Technologies (WAB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Greenbrier Companies and Westinghouse Air Brake Technologies are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. Investors should feel comfortable knowing that GBX likely has seen a stronger improvement to its earnings outlook than WAB has recently. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

GBX currently has a forward P/E ratio of 12.68, while WAB has a forward P/E of 26.19. We also note that GBX has a PEG ratio of 0.54. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. WAB currently has a PEG ratio of 1.55.

Another notable valuation metric for GBX is its P/B ratio of 1.34. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, WAB has a P/B of 3.33.

Based on these metrics and many more, GBX holds a Value grade of A, while WAB has a Value grade of D.

GBX has seen stronger estimate revision activity and sports more attractive valuation metrics than WAB, so it seems like value investors will conclude that GBX is the superior option right now.

Zacks Investment Research