Yahoo Finance Wabtec (WAB) Up 3.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Westinghouse Air Brake Technologies (WAB). Shares have added about 3.9% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Wabtec Q1 Earnings Surpass Estimates
Wabtec reported first-quarter 2024 earnings (excluding 36 cents from non-recurring items) of $1.89 per share, which surpassed the Zacks Consensus Estimate of $1.49. The bottom line improved 47.66% year over year owing to higher sales.
Revenues of $2.50 billion surpassed the Zacks Consensus Estimate of $2.35 billion. The top line grew 13.81% year over year due to higher sales of the Freight and Transit segments.
Total operating expenses in the reported quarter increased by $14 million to $403 million. The operating ratio (operating expenses as a percentage of revenues) improved to 16.2% from the year-ago quarter figure of 17.7%. A lower value of the metric is preferable.
The adjusted operating margin increased 3.4 points to 19.8%. The operating margin benefited from higher sales and improved price/mix and productivity.
During the March quarter, WAB generated cash from operations of $334 million compared with cash used for operations of $25 million a year ago. The improvement was due to higher earnings and improved working capital management.
WAB exited the quarter with cash, cash equivalents and restricted cash of $639 million and a total debt of $4 billion. In the first quarter of 2024, WAB’s total available liquidity was $2.13 billion. WAB repurchased shares worth $175 million in the March quarter, apart from paying dividends worth $36 million.
Segmental Highlights
Freight net sales of $1.8 billion exceeded our expectations of $1.7 billion. Results were boosted by the strong performance of Equipment and Services. Freight operating margin increased to 20.2% from 14.5% in the first quarter of 2023.
In the Transit segment, net sales grew 5.5% year over year to $673 million due to strong aftermarket sales. The actual segmental sales figure was higher than our projection of $659 million. The segmental adjusted operating margin decreased to 12.7% from 12.9% in the first quarter of 2023.
2024 Guidance
Wabtec now expects sales in the $10.25-$10.55 billion band. The earlier guidance was in the band of $10.05-$10.35 billion. Adjusted earnings per share are now 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 Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 8.29% due to these changes.
VGM Scores
At this time, Wabtec has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Wabtec has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Wabtec belongs to the Zacks Transportation - Equipment and Leasing industry. Another stock from the same industry, Gatx (GATX), has gained 5.5% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
Gatx reported revenues of $379.9 million in the last reported quarter, representing a year-over-year change of +12.1%. EPS of $2.01 for the same period compares with $2.20 a year ago.
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