On Thursday, Redburn-Atlantic adjusted its stance on Wabtec Corporation (NYSE:WAB), downgrading the stock from Buy to Neutral and setting a price target of $135. The firm cited the company's solid fourth quarter and full-year 2023 performance, as well as its 2024 guidance, which aligns with current consensus. Despite these positive indicators, the firm believes that Wabtec's recent strong share price performance has reached a plateau, with the updated earnings profile not supporting further multiple expansion.
Wabtec's recent financial report showcased robust numbers for both the fourth quarter of 2023 and the entire fiscal year. The company has also provided guidance for the fiscal year 2024 that meets the expectations set by market consensus. This reflects a steady operational outlook for the firm as it moves forward into the new fiscal year.
The decision to downgrade Wabtec's stock rating comes after a period of notable gains in its share price. Redburn-Atlantic's analysis suggests that while the company's financial health is stable, the current valuation is fully priced, leaving little room for additional growth in the stock's multiple—a key metric that investors use to assess the price of a stock relative to its earnings.
Redburn-Atlantic's new price target of $135 for Wabtec is derived from an 18.0 times multiple of the firm's projected earnings per share (EPS) for the fiscal year 2025. This target reflects the firm's current view on the potential future earnings capacity of Wabtec and the appropriate valuation multiple based on those earnings.
The change in rating to Neutral indicates that Redburn-Atlantic now views Wabtec's stock as fairly valued at its current price, suggesting that the stock may offer limited upside potential relative to other investment opportunities in the market. Investors holding Wabtec shares will likely consider this new assessment as they make decisions about their investment portfolios.
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