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shares Westinghouse Brake (NYSE:WAB) Shares have risen to new highs as business appears to be on track, driving further growth in revenue and earnings.
A combination of long-term tailwinds and occasional complementary trading activity creates value for investors.Following a big A deal about GE’s transportation business about five years ago limited operating performance during the pandemic, but the company has performed strongly in recent years.
Currently, the company’s performance is consistent with its positioning. This makes the recent share price gains well-deserved, as is the current valuation.
service railway
Wabtec supply Provides equipment and services to railroad companies, including locomotives, freight cars and services, transportation, intelligence and related products. More than 70% of sales come from the freight segment, supplemented by the smaller transportation market.
As the number of installs grows The company enjoys long-term growth as economic growth and decarbonization are key long-term drivers, and of course, greater recurring revenue from a large installed base. Additionally, safety concerns have risen in North America following a number of high-profile derailments.
Wabtec took shape after acquiring GE Transportation in 2019, a huge deal that saw Wabtec take advantage of the difficulties the group was facing at the time. This was a huge deal and the acquisition prices for these events exceeded even the valuations at the time!
The merger is expected to create a business of nearly $8 billion, with an EBIT margin of about 15% and earnings per share of about $4. The full integration of these activities could push earnings to $5 per share over time, given the fact that synergies from the deal are still accruing today.
The company didn’t deliver on these ambitions in 2020, and given how things turned out that year, it’s obvious why, as the original promise was only more or less fulfilled in 2021.
By 2022, the company’s sales will grow to $8.4 billion, with adjusted earnings per share of $4.86. In 2023, revenue is expected to increase to $8.7-9 billion, with median earnings per share of $5.35.
The good news continues
The company started 2024 with a flurry of good news, and the momentum has pushed its stock price to an all-time high of about $141 per share.January, Wabtec declare A $157 million braking system order from Siemens India. Deals were subsequently struck with Norske Tog and CSX (CSX) as the value of the two orders has not yet been quantified.
By mid-February, Wabtec announced its 2023 results, and despite some inflationary pressures, revenue for the year increased by more than 15% to $9.7 billion, far exceeding initial expectations for the year. With gross profit margins stable, Wabtec improved GAAP operating margins by a full percentage point to 13.1% of sales, with GAAP earnings of $815 million, equivalent to $4.53 per share.
Adjusted earnings were $5.92 per share, with most of the difference due to amortization expenses, which I’d be happy to adjust for as adjusted earnings improved even faster.
While the total backlog fell 2% to $22 billion, it’s encouraging to see that the 12-month backlog increased 10% to nearly $7.5 billion, providing a strong outlook for 2024. Additionally, total order backlog increased by approximately $500 million. By the end of season three. Given the momentum and backlog, Wabtec expects mid-year sales of $10.2 billion in 2024, plus or minus $150 million. Adjusted earnings are expected to be $6.70 per share, plus or minus 20 cents.
Net debt is reported to be close to $2.7 billion, which is a very reasonable number, EBITDA has risen to over $1.8 billion, and leverage is just under 1.5x, with further growth expected in 2024. Buoyed by its stronger financial position, Wabtec announced a $1 billion stock repurchase program, enough to repurchase approximately 4% of its outstanding shares. The company also raised its quarterly dividend by more than 17% to $0.20 per share (on a quarterly basis), while yielding just 0.6%.
more good news
After the release of fourth-quarter results, Wabtec declare 500 million reais order from Brazil’s MRS Logistica, a deal worth about $100 million.followed by emission A new generation of railcar mobility – Commander NXT – will be launched at the end of February.
With shares rising to the $141 mark, the company currently trades at 21 times forward earnings, as higher stock prices seem natural. After all, the company delivered convincing growth in 2023 and set solid guidance for 2024, as Wabtec more than delivered on the promises communicated in its deal with GE Transportation.
This is supported by continued execution, bolt-on acquisitions and integration of both companies, with long-term drivers supporting a secular bull market driving long-term growth here.
I’ve long believed in the consolidation story, and although the valuation multiple has expanded quite a bit, I’ve seen substantial gains from the position as the stock price has risen from $100 to $140 over the past year. The strong performance makes the current valuation still look quite reasonable, as Wabtec is really strong here, so it’s a little early to take profits.
