Wabtec Corporation

In July, Wabtec Corporation (WAB - Snapshot Report) reported record quarterly earnings and raised full year guidance. Will this Zacks #1 Rank (strong buy) keep it going in the face of a global slowdown?

Wabtec manufactures locomotives and a broad range of products for locomotives, freight cars and passenger transit vehicles. It also offers aftermarket services worldwide.

The company has two components. Westinghouse Air Brake was founded in 1869 by George Westinghouse after he created the first straight air brake system which revolutionized passenger train travel in the 1870s.

MotivePower Industries began building locomotives in the early 1970s. The two companies merged in 1999 to form Wabtec.

Building Locomotives for Central Florida and Seattle

On Sep 8, Wabtec announced its subsidiary MotivePower had signed contracts to build locomotives for commuter rail projects in Central Florida and Seattle for $30 million.

It is building 7 locomotives for the Central Florida project and 3 locomotives for the Seattle project. The locomotives are expected to be delivered in 2012 and 2013.

Best Quarter Ever in Q2

On July 26, Wabtec reported a record quarterly result which surprised on the Zacks Consensus for the 8th quarter in a row. Earnings per share were 94 cents compared to the Zacks Consensus of 85 cents.

Sales jumped 28% to a record $479 million due to strong growth in the Freight Group. It was the second quarter in a row that the company had record sales.

The backlog was also at a record high of $1.51 billion, up 40% from the end of 2010.

Raised Full Year Guidance

Given the record backlog and strong demand in both the first and second quarters, Wabtec raised its full year guidance to a range of $3.45 to $3.55 per share from its April guidance of $3.20 to $3.30 per share.

Revenue is expected to grow 20% for the year.

Zacks Consensus Estimates Rise

With another beat and with a higher revision to the earnings guidance, it's not surprising that analysts have been raising full year estimates.

The 2011 Zacks Consensus jumped to $3.57 from $3.39 per share in the last 60 days. That is above the company's guidance range. But with two record quarters in a row and a record backlog, it makes sense that they may do it again in the third or fourth quarter.

That is earnings growth of 39.4% which isn't too shabby for a company that was founded 142 years ago.

Shares Retreat

Like most of the stock market, Wabtec shares have sold off in recent weeks making it an even more attractive buying opportunity.

A Value Stock

Wabtec has a forward P/E of 14.9 which just puts it within the limit I use for value stocks, which is under 15.0. So it's not dirt cheap by that metric.

But it still have value fundamentals including a price-to-book ratio of 2.5. A P/B under 3.0 usually indicates value.

The company has other strong fundamentals including a return on equity of 15.7%. With its double digit earnings growth it also sports a PEG ratio of 0.9 which is right on the cusp of indicating the company is undervalued as well. Value investors look for a PEG under 1.0.

Shareholders also are rewarded with a dividend, but with a yield of just 0.2%, it's not the reason you're buying the company.

Wabtec is cashing in on worldwide railroad growth 142 years after it burst on the scene. Sometimes, the more things change, the more they stay the same.

Wabtec is scheduled to report third quarter results on Oct 26. We'll see if it can make it 3 record quarters in a row.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.

Read the full analyst report on WAB