Yahoo Finance Why Is Wabtec (WAB) Up 5.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Westinghouse Air Brake Technologies (WAB). Shares have added about 5.1% 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 EarningsLag Estimates
Wabtec reported fourth-quarter 2023 earnings (excluding 34 cents from non-recurring items) of $1.54 per share, which fell short of the Zacks Consensus Estimate of $1.57. The bottom line, however, improved 18.5% year over year owing to higher sales.
Revenues of $2.53 billion surpassed the Zacks Consensus Estimate of $2.49 billion. The top line grew 9.5% year over year on the back of higher sales of the Freight and Transit segments.
Total operating expenses in the reported quarter increased by $51 million to $456 million. Operating ratio (operating expenses as a percentage of revenues) deteriorated 60 basis points from the year-ago quarter to 18.1%. A lower value of the metric is preferable.
Adjusted operating margin increased 1.7 points to 17%. Operating margin benefited from higher sales and improved price/mix and productivity.
During the December quarter, WAB generated cash from operations of $686 million compared with $410 million a year ago. The uptick was due to higher earnings and improved working capital management. WAB exited the quarter with cash, cash equivalents and restricted cash of $620 million and total debt of $4.07 billion. At 2023-end, WAB’s total available liquidity was $2.12 billion. WAB repurchased shares worth $157 million and $409 million in the December quarter and full-year 2023, respectively.
Segmental Highlights
Freight net sales jumped 7.7% year over year to $1.8 billion, in line with our expectation. Results were boosted by double-digit growth in services and components. Segmental operating margin (on an adjusted basis) increased to 31.3% from 29.4% in fourth-quarter 2022.
In the Transit segment, net sales grew 14.3% year over year to $728 million due to strong aftermarket sales. The actual segmental sales figure was higher than our projection of $694 million. Segmental adjusted operating margin contracted to 29.4% from 30.3% in fourth-quarter 2022.
Other Notable Developments
Highlighting its pro-investor stance, management announced a 17.6% increase to its quarterly dividend. The new dividend of 20 cents per share will be paid on Mar 8, 2024, to shareholders of record at the close of business on Feb 23, 2024. The dividend hike raises Wabtec’s annualized cash dividend rate to 80 cents from 68 cents. In another shareholder-friendly move, WAB’s board announced a $1 billion share buyback authorization.
2024 Guidance
Wabtec expects sales in the $10.05-$10.35 billion band. The mid-point of the guided range, i.e. $10.2 billion. Adjusted earnings per share are estimated to be between $6.50 and $6.90. Management anticipates strong cash flow generation, with operating cash flow conversion exceeding 90%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Wabtec has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 B. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.
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Westinghouse Air Brake Technologies Corporation (WAB) : Free Stock Analysis Report
