SIEGY - Wabtec On Track For Strong Multiyear Mid-Teens EPS Growth On Recovering Rail Spending

2024-06-13 16:15:30 ET

Summary

• Wabtec stands out among heavy machinery peers with annual and sequential growth in backlog, and an overaged railcar and locomotive fleet can drive a multiyear reinvestment cycle.
• The North American locomotive fleet is older than it's ever been, and railroad operators will need to modernize their fleets to achieve performance and emissions targets.
• Wabtec is taking a clever approach to emission and alt fuel technologies, including systems that maximize flexibility between diesel and alternative fuels and leverage electrification benefits.
• Wabtec's mid-teens EPS growth potential is attractive, as are the above-average revenue growth and margin expansion opportunities, but valuation already seems to reflect much of this.

Deviations, aberrations, and exceptions get my attention when I’m looking at companies and stocks, and Westinghouse Air Brake Technologies ( WAB ) (better known as ”Wabtec”) stands out as one of the relatively few heavy machinery companies logging annual and sequential growth in its backlog. While rail traffic has been volatile of late, overaged equipment and healthy Class 1 rail businesses, not to mention emerging alternative power/fuel options) and public transit expansion projects, are supportive for capex and management has been executing well here....

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