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Will Cost Woes Hamper Wabtec (WAB) Stock in Q3 Earnings?

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Westinghouse Air Brake Technologies Corporation, operating as Wabtec Corporation (WAB - Free Report) , is scheduled to report third-quarter 2019 results on Oct 31, before the market opens.

The Zacks Consensus Estimate for third-quarter earnings has been revised 4.8% downward in the past 90 days.

Let’s delve into the factors that might have influenced third-quarter performance.

High selling, general and administrative expenses are pushing up operating costs and the third quarter is unlikely to have been any different. Similar to the first two quarters of 2019, such steep costs are likely to have affected the company’s bottom line in the soon-to-be-reported quarter. Consequently, operating ratio (operating expenses as a percentage of revenues) has most likely deteriorated in the quarter.

However, on a positive note, the inclusion of sales from GE Transportation (following its merger with the entity in February) is expected to have significantly boosted the company’s top line. The merger is expected to have driven net sales at the Transit and Freight segments. Evidently, the Zacks Consensus Estimate for net sales at the Transit and Freight segments indicates an approximate 3.9% and 257.1% rise, each from the respective year-ago reported figures. Additionally, organic sales growth might reflect on Transit net sales.


Earnings Whispers

Our proven model does not conclusively predict a beat for Wabtec this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. However, that is not the case here as highlighted below.

Earnings ESP: Wabtec has an Earnings ESP of -0.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Wabtec carries a Zacks Rank #4 (Sell).

Highlights of Q2 Earnings

In the last reported quarter, the company delivered a positive earnings surprise of 8.2%. The bottom line also improved 10.4% year over year. Although total sales jumped more than 100% year over year owing to the inclusion of GE Transportation products, it fell short of the Zacks Consensus Estimate.

Stocks to Consider

Investors interested in the broader Transportation  sector may consider Expeditors International of Washington, Inc. (EXPD - Free Report) , Golar LNG Limited (GLNG - Free Report) and Euronav NV (EURN - Free Report) as these stocks possess the right mix of elements to beat on earnings in their next releases.

Expeditors has an Earnings ESP of +0.74% and a Zacks Rank of 3. The company will report third-quarter 2019 results on Nov 5.

Golar LNG has an Earnings ESP of +16.52% and a Zacks Rank #3. The company will announce third-quarter earnings results on Nov 26.

Euronav has an Earnings ESP of +1.92% and a Zacks Rank of 1. The company will release third-quarter financial numbers on Oct 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

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