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Wabash Beats by a Penny

Zacks Equity Research

Wabash National Corp. (WNC) reported a significant boost in adjusted earnings per share to 23 cents in the second quarter of 2012, compared to 6 cents in the corresponding quarter of last year, surpassing the Zacks Consensus Estimate by a penny.

Profits increased almost fourfold to $15.5 million from $4.0 million in the year-ago quarter. Meanwhile, reported earnings were $1.9 million or 3 cents per share compared with $3.3 million or 5 cents per share in the second quarter of 2011.

The company’s revenues for the quarter augmented 26.2% to $362.4 million compared with $287.1 billion in the year-ago quarter. However, it missed the Zacks Consensus Estimate of $393 million. The year-over-year growth in revenues was driven by strong sales in the company’s Diversified Products segment.

Gross profit more than doubled to $39.7 million from $16.2 million in the year-ago quarter. The improvement was driven by higher gross profit earned from the Diversified Products segment.

Gross margin escalated to 10.9% from 5.7% recorded in the year-ago quarter. SG&A expenses increased 73.1% to $5.5 million in the quarter. Operating income swelled 67.4% to $8.6 million from $5.1 million recorded in the second quarter of 2011.

The increase in operating income was attributable to a mix of high-margin trailer orders, organic expansion within the Diversified Products segment and higher margin opportunities from the acquisition of Walker.

Revenues from the Commercial Trailer Products segment went up 11% to $280.7 million on a 3.5% increase in sales to 11,700 units, owing to strong demand. The rise in average selling prices by roughly 6% more than offset the increase in material cost. Gross profit from the segment more than doubled to $18.9 million or 6.7% of sales compared with $8.2 million or 3.3% recorded in the year-ago quarter.

Revenues from the Diversified Products segment amplified significantly by 182% to $76.5 million. The completion of the acquisition of Walker in the quarter added $44 million to revenues. Gross profit escalated to $17.7 million or 23.1% of sales compared to $5.4 million or 20% a year ago. The improvement in profits was due to an increase in productivity from the Walker acquisition and growth in Wabash Energy & Environmental Solutions business.

In May, 2012, Wabash completed the acquisition of Walker, which is a leading manufacturer of liquid-transportation systems and engineered products. The acquisition involved a cash transaction of $375 million. The integration will further strengthen the company’s diversification strategy and fuel the growth opportunities.

Revenues from the Retail segment decreased 8% to $33.3 million from $36.4 million in the second quarter of 2011. The decline was driven by a drop in retail shipment to 600 units from 900 units a year ago. Gross profit went up 18.8% to $3 million or 8.9% of sales in the quarter from $2.5 million or 6.9% of sales due to the improved trailer pricing and a favorable sales mix.

Wabash had cash balance of $31.6 million as of June 30, 2012, increasing from $20.0 million as of December 31, 2011. Total debt amounted to $442.0 million as of June 30, 2012 compared with $65.0 million as of December 31, 2011.

In the first six months of 2012, the company had a cash outflow from operating activities of $11.5 million, which is better than the cash outflow of $15.8 million in the first half of 2011. Capital expenditure amounted to $3.6 million in the period from $1.4 million in the second quarter of 2011.

Headquartered in Lafayette, Indiana, Wabash National was established in 1985. The company is the manufacturer and leading producer of semi trailers and liquid transportation systems in North America. It specializes in the designing and production of dry freight vans, refrigerated vans, platform trailers, liquid tank trailers, engineered products, and composite products.

It competes with Trinity Industries Inc. (TRN). Currently, the company retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.

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