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Wabtec's (WAB) Q3 Earnings Surpass Estimates, Improve Y/Y

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Westinghouse Air Brake Technologies Corporation, which operates as Wabtec Corporation WAB, reported third-quarter 2019 earnings (excluding 55 cents from non-recurring items) of $1.03 per share, beating the Zacks Consensus Estimate by 3 cents. Moreover, the bottom line improved 8.4% year over year. Results were aided by a strong operating performance.

Also, total sales soared more than 85% year over year to $2,001.7 million but fell short of the Zacks Consensus Estimate of $2,150 million. The substantial year-over-year increase in sales was owing to the inclusion of GE Transportation products. We remind investors that Wabtec’s merger with GE Transportation was completed in February 2019. Following this transaction, Wabtec was included in the coveted S&P 500 Index.

Total operating expenses in the reported quarter increased in excess of 100% to $430.3 million, primarily due to a 99% rise in selling, general and administrative expenses. Also, the operating ratio (operating expenses as a percentage of revenues) deteriorated to 21.5% from 16.4% in the prior-year period. Notably, lower the value of the metric the better.

Segmental Highlights

At the Transit segment, net sales climbed 3% to $706 million, driven by organic sales growth and acquisitions. Segmental operating margin (income from operations as a percentage of sales) decreased to 7.9% from 8.8% in the year-ago quarter.

Freight net sales soared 231% to $1,295.7 million despite organic sales decrease and unfavorable foreign currency related movements. Segmental sales were boosted by acquisitions worth $954 million. Segmental operating margin declined to 11.4% from 20.3% in the year-ago quarter.

Liquidity

As of Sep 30, 2019, Wabtec had $587.4 million in cash and cash equivalents compared with $580.9 million at the end of 2018. Long-term debt at the quarter-end was $4.63 billion compared with $3.79 billion at 2018 end.

2019 View Updated

Wabtec, carrying a Zacks Rank #4 (Sell), now anticipates sales (on an adjusted basis) of $8.2 billion for the current year (earlier view: $8.3 billion). Adjusted earnings are now expected between $4.15 and $4.20 per share (earlier guidance: $4.10-$4.20). The Zacks Consensus Estimate for the same stands at $4.17, marginally below the mid-point of the guided range. Adjusted EBITDA is now estimated at approximately $1.2 billion (earlier view: $1.6 billion billion).

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

Upcoming Releases

Investors interested in the broader Transportation sector are awaiting third-quarter earnings reports from key players like Expeditors International of Washington EXPD, Air Lease Corporation (AL - Free Report) and Hertz Global Holdings HTZ. While Hertz will release third-quarter results on Nov 4, Expeditors and Air Lease will announce the same on Nov 5 and Nov 7, respectively.

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