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Wabtec (WAB) to Report Q2 Earnings: What's in the Offing?

Zacks Equity Research

Westinghouse Air Brake Technologies Corporation, operating as Wabtec Corporation WAB, is scheduled to report second-quarter 2019 results on Jul 30, before market open.

In the last reported quarter, the company witnessed a negative earnings surprise of 32.5%. However, the bottom line improved on a year-over-year basis. On the top-line front, Wabtec outpaced the Zacks Consensus Estimate and increased year over year. Results were aided by the inclusion of GE Transportation products.

Furthermore, the company has a decent earnings surprise history, having outshined the Zacks Consensus Estimate in two of the trailing four quarters. While Wabtec delivered in-line earnings in third-quarter 2018, the metric missed estimates in fourth-quarter 2018.

Westinghouse Air Brake Technologies Corporation Price and EPS Surprise

 

Westinghouse Air Brake Technologies Corporation Price and EPS Surprise

Westinghouse Air Brake Technologies Corporation price-eps-surprise | Westinghouse Air Brake Technologies Corporation Quote

Let’s see how things are shaping up prior to the announcement of second-quarter 2019 results.

Which Way Are Estimates Headed?

The Zacks Consensus Estimate for second-quarter revenues is pegged at $2.26 billion compared with $1.11 billion recorded in the prior-year quarter. The uptick can be attributed to the expansion of Wabtec’s product portfolio following its merger with GE Transportation in February this year.

For quarterly earnings, the Zacks Consensus Estimate stands at 98 cents, indicating 2.1% growth from the year-earlier quarter figure. Notably, the company’s earnings estimates for the second quarter have been revised downward to the tune of 9.3% or 10 cents over the past 90 days.

Let’s delve deep to unearth the factors likely to influence this Wilmerding, PA-based company’s results in the to-be-reported quarter.

Wabtec’s high operating expenses are likely to hurt its bottom-line growth in the second quarter. Although the company’s merger with GE Transportation is a huge positive, it is worth noting that the same will push expenses further due to integration costs. Also, steep operating expenses might affect the operating ratio (operating expenses as a percentage of revenues) — a key measure of efficiency.

However, Wabtec’s expanded portfolio owing to the inclusion of GE Transportation products is likely to boost the top line in the quarter to be reported as was the case in the first quarter. Net sales at both segments — Transit and Freight — are expected to show significant improvement year over year, courtesy of sales growth and acquisitions. Evidently, the Zacks Consensus Estimate for sales (to external customers) at the Freight segment is pegged at $1,521 million, suggesting 76% growth from the figure reported in first-quarter 2019. The same for sales (to external customers) at the Transit segment stands at $738 million, implying a 2.9% sequential improvement.

What the Zacks Model Unveils

Our proven model does not show that Wabtec is likely to beat estimates in the second quarter. This is because a stock needs to have both — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. 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 #3.

Earnings ESP: Wabtec has an Earnings ESP of 0.00% as the Zacks Consensus Estimate of 98 cents is in line with the Most Accurate Estimate.

Stocks to Consider

Investors interested in the broader Transportation sector may consider United Parcel Service UPS, American Airlines AAL and Ryder System R as these stocks possess the right mix of elements to beat on earnings in the next releases.

UPS is a Zacks #3 Ranked company and has an Earnings ESP of +0.05%. The company will release second-quarter 2019 results on Jul 24. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Airlines has an Earnings ESP of +0.85% and a Zacks Rank #3. This company is scheduled to announce second-quarter 2019 numbers on Jul 25.

Ryder has an Earnings ESP of +0.07% and a Zacks Rank #3. This company is scheduled to announce second-quarter 2019 numbers on Jul 30.

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