A month has gone by since the last earnings report for Westinghouse Air Brake Technologies (WAB). Shares have added about 15.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Wabtec due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Wabtec’s Q1 Earnings Miss Estimates
Wabtec reported first-quarter 2020 earnings (excluding 39 cents from non-recurring items) of 97 cents per share, falling short of the Zacks Consensus Estimate by a couple of cents. Moreover, the bottom line declined 8.5% year over year due to higher operating expenses.
Also, total sales jumped 21.1% year over year to $1,929.9 million but missed the Zacks Consensus Estimate of $2,026.2 million. This 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, the company was included in the coveted S&P 500 Index.
Total operating expenses in the reported quarter escalated 12.3% to $448.8 million, despite a 6.3% reduction in selling, general and administrative expenses. Also, the operating ratio (operating expenses as a percentage of revenues) improved to 18.7% from 20.2% in the prior-year period owing to higher revenues. Notably, lower the value of the metric the better.
Due to the coronavirus-induced uncertainty, the company withdrew its previously announced financial guidance for 2020.
At the Transit segment, net sales decreased 7.3 % to $628.9 million. Results were hurt by an organic sales decline of $34 million and unfavorable currency translations. The coronavirus-induced supply-chain disruptions also hurt segmental sales. Segmental operating margin (income from operations as a percentage of sales) increased to 10.9% from 8.8% in the year-ago quarter.
Freight net sales surged 42% to $1,301 million despite organic sales decrease and adverse foreign currency movements. Segmental results were boosted by sales from acquisitions worth$506 million. Segmental operating margin improved to 12.4% from 8.8% in the year-ago quarter.
Balance Sheet Data
As of Mar 31, 2020, Wabtec had $615.9 million in cash and cash equivalents compared with $604.2 million at the end of 2019. Long-term debt at the quarter-end was $4,655.1 million compared with $4,333.6 million at 2019 end.
How Have Estimates Been Moving Since Then?
Estimates review followed a downward path over the past two months. The consensus estimate has shifted -24.35% due to these changes.
Currently, Wabtec has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Wabtec has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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