Westinghouse Air Brake Technologies Corporation WAB, which operates as Wabtec, is being aided by its growth-by-acquisition strategy. Efforts to reward its shareholders also bode well. However, high operating expenses are hurting Wabtec’s bottom line.
Factors Favoring WAB
Wabtec’s acquisition of Collins Aerospace’s ARINC rail solutions business segment in June 2022 is expected to drive growth. The transaction expands its digital and electronics portfolio, and enhances productivity, safety and efficiency across itsglobal rail network.
The acquisition helps Wabtec expand across the United States and Canada, and offer support for transit, regional, inter-city, commuter, subway and light rail systems through ARINC’s rail solutions business. Additionally, WAB’s acquisition of Nordco in 2021 helped it widen its installed base, and facilitate domestic and international growth across the latter’s innovative product portfolio.
In January 2022, Wabtec acquired the railway friction business ofIndia-based MASU for approximately $34 million. The buyout strengthens WAB’s installed base and expands its brake product portfolio. The series of acquisitions isexpected to boost the acquirer’s top line.
Wabtec’s cash position is impressive too. WAB exited the second quarter of 2022 with cash and equivalents of $501 million, above the current debt of $226 million. This indicates that it has enough cash to meet its current debt obligations.Efforts to reward its shareholders also bode well.
Wabtec currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Supply-chain disruptions are a bane for Wabtec. In second-quarter 2022, sales at the transit segment declined 17.5% to $558 million due to supply-chain issues. The same declined 6.5% year over year in first-quarter 2022. Factors like higher commodity costs and shortages of component, chip and labor are denting results.
High operating expenses are hurting Wabtec's bottom line. Total operating expenses in the second quarter of 2022 increased 1.1% year over year to $381 million. The operating ratio (operating expenses as a percentage of revenues) deteriorated 10 basis points from the year-ago quarter’s figure to 18.6%.
Stocks to Consider
Some better-ranked stocks in the Zacks Transportation sector are Triton International TRTN and C.H. Robinson CHRW.
Triton is being aided by the gradual increase in trade volumes and container demand. TRTN expects container demand to remain strong throughout 2022. Measures to reward its shareholders through dividends and buybacks instill confidence in the stock.
Triton has an expected earnings growth rate of 22.4% for the current year. TRTN’s bottom line outpaced the Zacks Consensus Estimate in each of the last four quarters, the average being 7.5%. TRTN currently carries a Zacks Rank #2 (Buy).
C.H. Robinson is being aided by an improving freight scenario in the United States. Efforts to control costs also bode well. Measures to reward its shareholders instill confidence in the stock.
CHRW has a pleasant earnings track record. The bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark in the remaining one). The average beat is 24.2%. The stock has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 17.3% upward over the past 60 days. C.H. Robinson currently carries a Zacks Rank of 2.
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