Wabtec Corporation posted robust third-quarter 2023 earnings, with sales climbing 22.5% year-over-year to reach $2.5 billion. The company's cash flow from operations stood at $425 million, while a 13% increase in the 12-month backlog to over $7 billion signaled continued growth into 2024. Wabtec also announced a strategic $2 billion agreement with Kazakhstan's national railway company, expected to boost orders and sales growth in 2024. The company revised its full-year sales and adjusted earnings guidance upwards, reflecting strong financial performance.
Key takeaways from the earnings call include:
- Wabtec's Freight and Transit segments present significant opportunities, including demand for new locomotives, modernizations, and digital solutions.
- The company's international markets continue to expand, with notable growth expected from Brazil, South Africa, Kazakhstan, and Australia.
- Despite manufacturing inefficiencies at its Erie facility, Wabtec reported a GAAP operating margin of 14.5% for Q3, up 2.0 percentage points from last year.
- The freight segment saw robust sales growth, with operating income increasing by 30.0% year-over-year.
- Wabtec returned $344 million of capital to shareholders through share repurchases and dividends year-to-date.
- The company raised its 2023 sales guidance to between $9.5 billion and $9.7 billion, and adjusted EPS guidance to between $5.80 and $6.00 per share.
Despite a decrease in multiyear backlog, CEO Rafael Santana and CFO John Olin (NYSE:OLN) expressed confidence in the company's strong pipeline of opportunities and the ability to drive profitable growth into 2024. They highlighted the strength of the short and mid-term backlog, momentum in new locomotives, and the benefits of Integration 2.0, a three-year program expected to result in savings of $75 million to $95 million in 2025.
While acknowledging the lumpy nature of the business, the company emphasized the importance of sustainable investments and longer-term agreements to ensure infrastructure support for delivering assets to customers worldwide. Despite a strike, Wabtec achieved record Freight revenue and the best segment margin since 2019, with expectations of continued growth in the future. The executives did not provide specific details about the potential impact of the strike on revenue and margin, but expressed gratitude for the team's effort in delivering revenue growth despite the strike.
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