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Wabtec (WAB) Down 1.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Westinghouse Air Brake Technologies (WAB - Free Report) . Shares have lost about 1.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Wabtec due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Wabtec’s Q4 Earnings Beat Estimates

Wabtec's earnings (excluding 16 cents from non-recurring items) of $1.18 per share, edged past the Zacks Consensus Estimate of $1.17. The bottom line improved 20.41% year over year, driven by 2.44% higher revenues to $2,073 million despite supply-chain disruptions. Total sales were boosted by higher revenues from the freight segment as economic activities gain pace. The top line, however, fell short of the Zacks Consensus Estimate of $2,180.3 million with supply-chain issues hurting total sales by 3-4%.

Total operating expenses in the reported quarter increased 12.5% year over year to $388 million primarily due to an 11.9% uptick in selling, general and administrative expenses. The operating ratio (operating expenses as a percentage of revenues) deteriorated 170 basis points from the year-ago quarter’s figure to 18.7%. During the quarter, WAB paid out dividends worth $23 million and bought back shares worth $100 million.

Segmental Highlights

Freight net sales increased 6.4% to $1,425 million. Results were boosted by upbeat demand for Freight Services and Components along with the acquisition of Nordco. Segmental operating margin (income from operations as a percentage of sales) increased to 14.5% from 9% in the year-ago quarter.

At the transit segment, net sales declined 5.4% to $648 million due to supply-chain issues, COVID-related disruptions and an unfavorable foreign currency exchange. Segmental operating margin improved to 12.2% from 8.3%.

Balance-Sheet Data

As of Dec 31, 2021, Wabtec had $473 million worth of cash and cash equivalents compared with $599 million at the end of 2020. WAB generated cash from operations of $314 million in the December quarter.

Long-term debt at the end of the quarter was $4,056 million compared with $3,792 million at 2020 end.

2022 Guidance

Wabtec anticipates sales in the range of $8.3-8.6 billion. Adjusted earnings per share are estimated in the band of $4.65-$5.05. Wabtec expects strong cash flow generation with operating cash flow conversion exceeding 90%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Wabtec has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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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