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Wabtec (WAB) Q3 Earnings Top Estimates, 2020 EPS View Bullish

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Westinghouse Air Brake Technologies Corporation, which operates as Wabtec Corporation (WAB - Free Report) , reported third-quarter 2020 earnings (excluding 28 cents from non-recurring items) of 95 cents per share. The bottom line surpassed the Zacks Consensus Estimate of 90 cents. However, the same declined 7.8% year over year due to lower revenues.

Total sales fell 6.8% year over year to $1,865.1 million but surpassed the Zacks Consensus Estimate of $1,829.1 million. This year-over-year downside was caused by weak revenues from Freight Services, Components, Digital Electronics and Transit sales.

Total operating expenses in the reported quarter dropped 16.5% to $359.5 million with 13.5% reduction in selling, general and administrative expenses. Also, the operating ratio (operating expenses as a percentage of revenues) improved to 19.3% from 21.5% in the prior-year quarter owing to lower costs. Notably, lower the value of the metric the better.

Moreover, Wabtec now forecasts 2020 adjusted earnings per share in the band of $3.75- $3.85 (old guidance: $3.50-$3.80). The midpoint ($3.80) of the guided range is above the Zacks Consensus Estimate of $3.78. The earnings and revenue beat in addition to the favorable earnings outlook seems to have pleased investors. Evidently, shares were up in early trading.

Segmental Highlights

Freight net sales fell 7.1% to $1,237.3 million. Results were hurt by organic sales decline of $84 million and forex woes. The coronavirus-induced disruptions hurt segmental numbers. Due to this, services were affected resulting in higher locomotive parking levels, lower demand for new freight car components and soft Digital Electronics sales. Segmental operating margin (income from operations as a percentage of sales) improved to 12.9% from 11.7% in the year-ago quarter.

At the transit segment, net sales declined 6.2% to $627.8 million due to lower organic sales to the tune of $59 million. Transit segment sales were hurt by coronavirus led lower original equipment and after-market sales. Segmental operating margin improved to 10.2% from 7.9% in the year-ago quarter.

Balance Sheet Data

As of Sep 30, 2020, Wabtec, currently carrying a Zacks Rank #3 (Hold), had $559.3 million worth cash and cash equivalents compared with $604.2 million at the end of 2019. The company generated cash from operations of $230 million in the September quarter. Long-term debt at the end of the quarter was $3,799.9 million compared with $4,333.6 million at 2019 end.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Guidance

For the current year, sales are now anticipated in the range of $7.5-$7.6 billion (old guidance: $7.3-$7.6 billion). The midpoint ($7.55 billion) of the newly guided range is below the Zacks Consensus Estimate of $7.58 billion. Moreover, the company hopes to achieve net synergy benefits of more than $150 million in the current year owing to cost-cutting measures and synergies from its merger with GE Transportation.  It also expects a strong cash flow generation during the year.

Sectorial Snapshots

Let’s take a look at some other Zacks Transportation sector companies’ third-quarter earnings.

Southwest Airlines (LUV - Free Report) incurred a loss of $1.99 per share (excluding 3 cents from non-recurring items) in the third quarter of 2020, narrower than the Zacks Consensus Estimate of a loss of $2.44. Moreover, operating revenues of $1,793 million surpassed the Zacks Consensus Estimate of $1,678.2 million.

Trinity Industries (TRN - Free Report) delivered third-quarter 2020 earnings (excluding 4 cents from non-recurring items) of 17 cents per share, massively surpassing the Zacks Consensus Estimate of 5 cents. Total revenues of $459.4 million also outperformed the Zacks Consensus Estimate of $443.8 million.

CSX Corporation (CSX - Free Report) reported third-quarter 2020 earnings of 96 cents per share, beating the Zacks Consensus Estimate of 93 cents. However, total revenues of $2,648 million lagged the Zacks Consensus Estimate of $2,704.6 million

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