Yahoo Finance Wabash (NYSE:WNC) Reports Sales Below Analyst Estimates In Q2 Earnings
Semi trailers and liquid transportation container manufacturer Wabash (NYSE:WNC) fell short of analysts' expectations in Q2 CY2024, with revenue down 19.8% year on year to $550.6 million. It made a non-GAAP profit of $0.64 per share, down from its profit of $1.53 per share in the same quarter last year.
Is now the time to buy Wabash? Find out in our full research report.
Wabash (WNC) Q2 CY2024 Highlights:
Revenue: $550.6 million vs analyst estimates of $594.7 million (7.4% miss)
EPS (non-GAAP): $0.64 vs analyst estimates of $0.56 (15.3% beat)
Lowered full year guidance for revenue and EPS (non-GAAP)
Gross Margin (GAAP): 16.3%, down from 22% in the same quarter last year
Free Cash Flow was -$6.08 million compared to -$36.6 million in the previous quarter
Backlog: $1.3 billion at quarter end, down 45.8% year on year
Market Capitalization: $1.02 billion
"While the demand environment has incrementally weakened during the first half of 2024, our team has executed well, as shown by second quarter EPS generation that exceeded our prior outlook range," said Brent Yeagy, President and Chief Executive Officer.
With its first trailer reportedly built on two sawhorses, Wabash (NYSE:WNC) offers semi trailers, liquid transportation containers, truck bodies, and equipment for moving goods.
Heavy Transportation Equipment
Heavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.
Sales Growth
A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Over the last five years, Wabash's sales were flat. This shows demand was soft and is a tough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Wabash's annualized revenue growth of 3.3% over the last two years is above its five-year trend, but we were still disappointed by the results.
We can better understand the company's revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Wabash's backlog reached $1.3 billion in the latest quarter and averaged 6.7% year-on-year declines over the last two years. Because this number is lower than its revenue growth, we can see the company hasn't secured enough new orders to maintain its growth rate in the future.
This quarter, Wabash missed Wall Street's estimates and reported a rather uninspiring 19.8% year-on-year revenue decline, generating $550.6 million of revenue. Looking ahead, Wall Street expects revenue to decline 3.9% over the next 12 months.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefitting from the rise of AI, available to you FREE via this link.
Operating Margin
Operating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Wabash was profitable over the last five years but held back by its large expense base. It demonstrated paltry profitability for an industrials business, producing an average operating margin of 5.4%. This isn't too surprising given its low gross margin as a starting point.
On the bright side, Wabash's annual operating margin rose by 11 percentage points over the last five years.
In Q2, Wabash generated an operating profit margin of 7.9%, down 7.1 percentage points year on year. Since Wabash's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because its general expenses like sales, marketing, and administrative overhead increased.
EPS
Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Wabash's EPS grew at a spectacular 16.8% compounded annual growth rate over the last five years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.
We can take a deeper look into Wabash's earnings quality to better understand the drivers of its performance. As we mentioned earlier, Wabash's operating margin declined this quarter but expanded by 11 percentage points over the last five years. Its share count also shrank by 18.5%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Wabash, its two-year annual EPS growth of 80.8% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.
In Q2, Wabash reported EPS at $0.64, down from $1.53 in the same quarter last year. Despite falling year on year, this print easily cleared analysts' estimates. Over the next 12 months, Wall Street expects Wabash to perform poorly. Analysts are projecting its EPS of $3.26 in the last year to shrink by 35.3% to $2.11.
Key Takeaways from Wabash's Q2 Results
We enjoyed seeing Wabash exceed analysts' EPS expectations this quarter. On the other hand, its revenue unfortunately missed and its backlog fell short Wall Street's estimates. The company also lowered its full year revenue and EPS guidance. Overall, this was a bad quarter for Wabash. The stock traded down 3.2% to $21.80 immediately after reporting.
Wabash may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
