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Wabco (WBC) Up 10.8% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Wabco Holdings (WBC - Free Report) . Shares have added about 10.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Wabco 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 drivers.

WABCO Q3 Earnings Drive Past Estimates, Revenues Miss

WABCO’s third-quarter 2018 earnings were $1.78 per share, beating the Zacks Consensus Estimate of $1.60. Moreover, the bottom line improved 4.1% from the prior-year quarter figure of $1.71.

On a reported basis, total revenues rose 10.5% to $914.8 million from $827.8 million a year ago. However, revenues lagged the Zacks Consensus Estimate of $934 million. During the quarter under review, global truck and bus production decreased by 8% on a year-over-year basis.

During the reported quarter, gross profit was $275.1 million compared with $249.6 million recorded in third-quarter 2017. Adjusted operating expenses rose to $163.1 million from $136.1 million in the prior-year quarter.

Financial Details

WABCO had cash and cash equivalents of $832.2 million as of Sep 30, 2018, compared with $1.14 billion as of Dec 31, 2017. The company’s long-term debt was $861.7 million as of Sep 30, 2018, marking a decline from $1.02 billion as of Dec 31, 2017.

In third-quarter 2018, WABCO witnessed net cash inflow of $134.4 million from operations compared with $84.1 million a year ago.

Share Buyback Update

During the third quarter, the company bought 740,490 shares for $90.2 million. Between June 2011 and September 2018, it repurchased 20,998,402 shares for $1.8 billion in open market transactions.

In 2018, WABCO aims to repurchase shares worth approximately $300 million, subject to market conditions and regularity approvals.

2018 Outlook

For 2018, WABCO anticipates net sales of approximately $3.85-$3.90 billion compared with $3.85-$3.95 billion stated earlier. The company updated its performance operating margin expectation from 14.3-14.7% to 14.2-14.4%. Performance adjusted earnings per share are expected to be $7.65-$7.85 versus $7.45-$7.75 stated earlier.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

Currently, Wabco has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Wabco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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