This transportation company beat analysts’ EPS estimates by a nickel last quarter. Wall Street expects the company to grow 15% annually for the next five years.
Westinghouse Air Brake Technologies Corporation (WAB)
From Hendershot Investments
Westinghouse Air Brake Technologies Corporation (WAB), or Wabtec, reported first quarter revenues declined 6%, to $772 million, with net income down 2%, to $94.1 million, and EPS up 3%, to $1.02, on lower shares outstanding. Transit sales were up 7% during the quarter, which was more than offset by the 14% decline in Freight revenues, due to disappointing rail volume as every transportation company faces the challenges of a sluggish global economy.
Despite the decline in sales, Wabtec expanded its operating margin reflecting benefits from cost-reduction initiatives. The company’s multi-year backlog ended the quarter at $2.1 billion. Based on the first quarter results and the outlook for the balance of the year, management reaffirmed 2016 guidance for EPS in the range of $4.30-$4.50, which represents 7% growth at the midpoint of the range, with revenues now expected to be down slightly for the year.
This guidance does not include the pending Faively Transport acquisition, which is expected to occur in the fourth quarter of 2016. Faively has annual revenues of $1.2 billion. When Wabtec combines with Faively, total revenues should approach $4.5 billion.
Wabtec recently increased its regular quarterly dividend 25% to 10 cents per share, reflecting the company’s financial strength to invest in growth opportunities while returning a greater portion of cash flow to shareholders.
Ingrid R. Hendershot, Hendershot Investments, www.hendershotinvestments.com, 703-361-6130, June 17, 2016