Segmental Strength and Dividend Aid Wabtec (WAB), Costs Ail
Westinghouse Air Brake Technologies Corporation, operating as Wabtec Corporation (WAB), is benefiting from strength across both its segments and shareholder-friendly initiatives. However, higher expenses act as a concern for the company’s bottom line.
Let’s discuss these factors in detail.
Wabtec’s fourth-quarter 2023 revenues of $2.53 billion surpassed the Zacks Consensus Estimate of $2.49 billion. The top line grew 9.5% year over year on the back of higher sales of the Freight and Transit segments. While Freight segment benefits from growth in services and components, transit segment gains from strong aftermarket sales.
For 2024, Wabtec expects sales in the range of $10.05-$10.35 billion.
Highlighting its pro-investor stance, Wabtec's management announced a 17.6% increase to its quarterly dividend (concurrent with its fourth-quarter 2023 earnings release on Feb 14, 2024). The new dividend of 20 cents per share will be paid on Mar 8, 2024, to shareholders of record at the close of business on Feb 23. The dividend hike raises Wabtec’s annualized cash dividend rate from 68 cents to 80 cents.
Additionally, WAB’s board announced a $1 billion share buyback authorization. WAB has been consistently making efforts to reward its shareholders through dividends and share buybacks, which are encouraging. In 2023, WAB rewarded its shareholders through a combination of cash dividends ($123 million) and share repurchases ($409 million).
Such shareholder-friendly initiatives not only boost investor confidence but positively impact the company's bottom line. Partly due to these tailwinds, shares of WAB have gained 29.2% over the past year, outperforming the industry’s rise of 19.1% and Zacks S&P 500 Composite’s northward movement of 25.5%.
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On the flip side, high operating expenses are restricting Wabtec’s bottom-line growth. In 2023, selling, general and administrative expenses rose 10.7% year over year, while engineering expenses climbed 4.3%. Total operating expenses in 2023 increased 9.7% year over year.
Zacks Rank and Stocks to Consider
Wabtec currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Zacks Transportation sector are GATXCorporation GATX and SkyWest, Inc. SKYW. Each stock presently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GATX has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the last four quarters (missing the mark in the remaining one). The average beat is 16.47%.
The Zacks Consensus Estimate for 2024 earnings has been revised 6.1% upward over the past 90 days. GATX has an expected earnings growth rate of 3.68% for 2024. Shares of GATX have gained 18% in the past year.
SkyWest's fleet-modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 6.3% over the past 90 days. Shares of SKYW have surged 205.3% in the past year.
SKYW has an expected earnings growth rate of more than 100% for 2024. SKYW delivered a trailing four-quarter earnings surprise of 128.02%, on average.
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