WAB:17% EPS Growth Modeled for 2018; Shares are Over 20% Off their High
- The shares are 22% off their April 2015 high of $105 despite double-digit EPS growth expected to resume in 4Q17, and EPS projected up 17% to $4.08 in 2018 (vs the record $4.10 in 2015).
- The Freight market (35% of revenue), with margins nearly double that of Transit (65%) is now showing signs of a recovery in the aftermarket, which could render our estimates conservative.
- A record $4.5 billion backlog, aftermarket sales (57% of the corporate total), increased global transit exposure with acquired Faiveley, and an installed base on virtually every North American locomotive and freight car should help reduce cyclicality.
- The $1.7 billion acquisition of Faiveley Transport makes Wabtec the global Freight & Transit market leader and significantly increases growth opportunities in European and Asian transit markets.
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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