Double-Digit EPS Growth Should Now Return; 3Q Operating Income In-Line
- Wabtec’s 3Q17 (Sept) adjusted EPS of $0.88 (vs $0.94 a year earlier) beat our estimate by 4 cents due entirely to a lower-than-anticipated tax rate - operating income was in line with our model on better-than-expected revenue;
- Our 2017 EPS projection is now $3.50 (vs $3.85 in 2016, Company slightly lowered guidance of $3.45-to-$3.50, and our previous $3.58 estimate) due to some projects in the Transit backlog ramping up slower-than-anticipated;
- For 2018, our EPS estimate is now $4.08 (from $4.20), up 17% from a difficult 2017, assuming better results in Freight and synergies from Faiveley (LEY);
- We are maintaining our GRADUALLY ACCUMULATE rating, with double-digit EPS growth expected to resume in the current quarter, given the record $4.53 billion backlog (up 2% sequentially) signs of life in the Freight aftermarket, growing synergies from LEY and easy prior-year comparisons.
Wabtec primarily serves the global freight rail and passenger transit industries. The company provides its products and services through two segments: Freight, which primarily manufactures and provides aftermarket parts and services for new locomotives; provides components for new and existing locomotives and freight cars; builds new commuter locomotives; and supplies rail control and infrastructure products, among others: and Transit, which primarily manufactures and services components for new and existing passenger transit vehicles, mainly regional trains, high speed trains, subway cars, light-rail vehicles and buses; and supplies rail control and infrastructure products, among others.
Great Lakes Review is located in Cleveland, Ohio, was founded in 1981 and became a division of Wellington Shields & Co. LLC in 2011. Great Lakes Review is a research boutique focused on the fundamentally-oriented investor seeking companies that dominate their respective specialty niche regardless of industry. The objective is to make money for the long-term by gradually accumulating a diversified portfolio from a universe of no more than 30 companies. Although short-term-oriented accounts will be alerted to trading opportunities, aggressive sell recommendations are triggered only by a deterioration in long-term fundamentals, not by short-term blips or investor fancy. Coverage of those names that lose their earnings momentum or earnings predictability may be dropped and replaced with more vital candidates.
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