Wabtec Corporation (WAB), a leading provider of freight and transit equipment and services, has seen its shares rally significantly this year, gaining 29.9% year-to-date. This performance outpaces the industry’s 5.9% decline and the S&P 500’s 17.9% rise over the same period. The company’s strong performance has not gone unnoticed, as it currently holds a Zacks Rank #1 (Strong Buy) rating.
Wabtec’s impressive track record of exceeding earnings estimates in the past four quarters, with an average surprise of 11.8%, is a key driver of its positive momentum. The company’s outlook for the future also appears promising, with analysts expecting continued growth in earnings and revenue. The Zacks Consensus Estimate for 2024 earnings is pegged at $1.86 per share, representing a 9.4% improvement from 2023. Revenue is projected to reach $2.64 billion, indicating a 3.7% increase from the previous year. Looking further ahead, the consensus estimate for 2025 earnings stands at $8.30 per share, implying an 11.3% growth from 2024 estimates. Revenue is expected to reach $10.82 billion, a 4.2% rise from 2024 estimates.
Wabtec’s growth is fueled by robust sales across both its Freight and Transit segments. The Freight segment benefits from increased demand for services and components, while the Transit segment is experiencing strong aftermarket and original equipment manufacturing sales. This growth strategy is evident in Wabtec’s 9.85% year-over-year revenue increase in 2023, driven by a 13% rise in Freight revenues, which account for 72.6% of the company’s total revenue. The ongoing summer season is expected to provide a further boost to revenues.
Wabtec’s financial position is also healthy, with the company ending the second quarter of 2024 with $595 million in cash and cash equivalents, exceeding its current debt level of $503 million. This substantial cash balance demonstrates the company’s ability to comfortably meet its current debt obligations. Additionally, Wabtec’s times interest earned ratio of 7.4 surpasses the industry average of 3.2, highlighting its strong financial stability.
As the economy continues to normalize following the pandemic, Wabtec’s performance is expected to remain positive. The company’s strong fundamentals, coupled with the uptick in the trading scenario, suggest that sales will continue to improve. However, investors should be aware of the potential challenges posed by rising fuel and labor costs, which can impact Wabtec’s profitability.
While Wabtec’s prospects appear promising, investors considering the stock should also explore other top-ranked companies in the Zacks Transportation sector. C.H. Robinson Worldwide (CHRW) and ZIM Integrated Shipping Services (ZIM) are notable examples. CHRW, with a Zacks Rank #1, boasts an expected earnings growth rate of 25.2% for the current year and a strong track record of exceeding earnings estimates. ZIM, also holding a Zacks Rank #1, has an impressive expected earnings growth rate of 257.2% for the current year.
