It has been about a month since the last earnings report for Westinghouse Air Brake Technologies (WAB - Free Report) . Shares have added about 11.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Wabtec 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 catalysts.
Wabtec Q3 Earnings in-Line, Revenues Beat
Westinghouse Air Brake reported third-quarter 2018 earnings (excluding 4 cents from non-recurring items) of 95 cents per share, in line with the Zacks Consensus Estimate. But the bottom line improved around 8% year over year.
Total sales increased 12.5% year over year to $1,077.8 million, surpassing the consensus mark of $986.3 million.
Total operating expenses in the reported quarter increased 16.7% to $176.83 million, primarily due to a 24.2% rise in selling, general and administrative expenses. Also, operating ratio (operating expenses as a percentage of revenues) deteriorated to 16.4% from 15.8% in the prior-year period.
Net sales in the Transit segment increased 11% to $686.23 million driven, by organic sales growth and sales from acquisitions. However, income from operations in the segment was $60.74 million, up 28%. As a result, the segmental operating margin (income from operations as a percentage of sales) increased to 8.9% from 7.7% in the year-ago quarter.
Freight net sales rose 15% to $391.58 million, backed by organic sales growth and sales from acquisitions. Meanwhile, income from operations was $79.42 million, up 29%. Also, the operating margin improved to 20.3% from 18.1% a year ago.
As of Sep 30, the company had $411.38 million in cash and cash equivalents compared with $233.4 million at the end of 2017. Long-term debt at the quarter-end was $3.82 billion compared with $1.82 billion at 2017 end.
The company now anticipates 2018 revenues to be $4.35 billion, higher than the expectation of $4.2 billion, issued during second-quarter 2018 results. Additionally, earnings (excluding estimated costs of the proposed merger with GE Transportation and certain other items) are still predicted to be $3.85 per share in the year. Adjusted operating margin is estimated to be roughly 13%, lower than 13.5%, projected earlier. Meanwhile, cash flow from operations is anticipated to be $200 million in the current year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Wabtec has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
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.