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Rail equipment company Westinghouse Air Brake Technologies (NYSE:WAB) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 9.8% year on year to $2.64 billion. The company expects the full year's revenue to be around $10.4 billion, in line with analysts' estimates. It made a non-GAAP profit of $1.96 per share, improving from its profit of $1.41 per share in the same quarter last year.
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Wabtec (WAB) Q2 CY2024 Highlights:
- Revenue: $2.64 billion vs analyst estimates of $2.62 billion (1% beat)
- EPS (non-GAAP): $1.96 vs analyst estimates of $1.88 (4% beat)
- The company reconfirmed its revenue guidance for the full year of $10.4 billion at the midpoint
- The company raised its EPS (non-GAAP) guidance for the full year of $7.35 billion at the midpoint
- Gross Margin (GAAP): 33.1%, up from 30.4% in the same quarter last year
- Organic Revenue rose 9.8% year on year (17.3% in the same quarter last year)
- Market Capitalization: $29.65 billion
Also known as Wabtec, Westinghouse Air Brake Technologies (NYSE:WAB) provides equipment, systems, and its related software for the railway industry.
Heavy Transportation EquipmentHeavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Luckily, Wabtec's sales grew at an impressive 11.1% compounded annual growth rate over the last five years. This is a great starting point for our analysis because it shows Wabtec's offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Wabtec's annualized revenue growth of 13.3% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.
We can dig further into the company's sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations because they don't accurately reflect its fundamentals. Over the last two years, Wabtec's organic revenue averaged 13.5% year-on-year growth. Because this number aligns with its normal revenue growth, we can see the company's core operations (not M&A) drove most of its performance.
This quarter, Wabtec reported solid year-on-year revenue growth of 9.8%, and its $2.64 billion of revenue outperformed Wall Street's estimates by 1%. Looking ahead, Wall Street expects sales to grow 4.1% over the next 12 months, a deceleration from this quarter.
Operating MarginRead More Operating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Wabtec has been an optimally-run company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 11.9%.
Analyzing the trend in its profitability, Wabtec's annual operating margin rose by 5.3 percentage points over the last five years, showing its efficiency has significantly improved.
In Q2, Wabtec generated an operating profit margin of 16.3%, up 3.3 percentage points year on year. This increase was encouraging, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with its general expenses like sales, marketing, and administrative overhead.
EPSRead MoreAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions. Wabtec's solid 11.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. Wabtec's two-year annual EPS growth of 23.1% was fantastic and topped its 13.3% two-year revenue growth.
In Q2, Wabtec reported EPS at $1.96, up from $1.41 in the same quarter last year. This print beat analysts' estimates by 4%. Over the next 12 months, Wall Street expects Wabtec to grow its earnings. Analysts are projecting its EPS of $7.09 in the last year to climb by 8.1% to $7.66.
Key Takeaways from Wabtec's Q2 Results It was good to see Wabtec beat analysts' revenue and EPS expectations this quarter, based on what management called a strong demand environment. We were also glad that the company raised its full-year EPS guidance, which came in higher than Wall Street's estimates. Zooming out, we think this was a solid quarter, showing the company is staying on target. The stock remained flat at $168 immediately after reporting.
