PITTSBURGH — Wabtec’s revenue and profits increased in the fourth quarter, but the company’s stock tumbled 11% yesterday because the quarterly results and a new five-year outlook both came in below Wall Street expectations.
The drop in Wabtec’s stock price was the largest in the S&P 500.
Quarterly operating income increased 8.4%, to $334 million, as revenue grew 2.3%, to $2.58 billion. Earnings per share increased 2.5%, to $1.23.
The company’s order backlog was $7.68 billion, an increase of 2.6% compared to a year ago.
“The Wabtec team delivered a strong 2024 as evidenced by higher orders, sales, margin expansion, increased earnings and robust cash flow,” CEO Rafael Santana said in a statement.
“I am encouraged by the underlying momentum of our business, and the team’s unrelenting focus on execution and delivering for our customers. And just as importantly, we continue to lay a solid foundation for us to build upon. Looking ahead, I believe Wabtec is well positioned to drive top quartile returns over time,” he added.
Wabtec is in discussions with Class I railroads regarding orders for new locomotives as well as additional modernization programs for older units, executives said.
In the fourth quarter Wabtec won $1 billion worth of orders for new locomotives and modernizations. The North American modernization orders include $165 million from Ferromex and $190 million split between two unnamed Class I railroads.
In addition, Wabtec has taken orders worth $74 million for upgrading Trip Optimizer and Locotrol on locomotives in North America.
Internationally, Wabtec recently received new locomotive orders worth $401 million from six customers, as well as a $248 million order for the Simandou mining project in West Africa.
Most of Wabtec’s fourth-quarter growth, however, came from its Transit segment. Transit revenue was up 7.1% for the quarter thanks to original equipment and aftermarket sales.
The company’s five-year outlook includes mid single-digit growth in sales, a 3.5-point improvement in its profit margin, and double-digit growth in earnings per share. The profit margin expansion is expected to come from primarily from cost improvements and the pruning of lower-margin product lines.
Wabtec got a nice 48 Million Dollar grant boost from the Feds in October, 2024. That should help a “ton”.
Wall Street thinks the Class Ones are up a creek without a paddle or in this case rails, why shouldn’t they treat the major rail suppliers any different. The days of huge thousand plus locomotive orders (UP-EMD SD70M’s) are historee. A big order now might be 25 new units. As costs of new units continue to rise, rebuild orders will continue to grow, additionally reducing manufacturers projected profits. Wabtec, Progress Rail, and the smaller participants like Brookville will just have to start being more realistic, otherwise Wall Street will start demanding “lower operating ratios” from them which to them mean layoffs and the like. That’ll be bad news for the rail industry at large… Maybe they will develop new Precision Scheduled Manufacturing…. Oh yeah, that only works when you have orders…
Basically some stock analyst(s) translated their order backlog into revenue too soon. Common for people who don’t have heavy industrial experience and only look at the numbers.
Looks like some hedge fund manager is butthurt because s/he didn’t get “enough” (like that exists in the hedge fund managers’ lexicon) blood from the Wabtec stone.
Bad hedge fund manager, bad! No cocaine for you!