Why did Wabtec raise its 2024 guidance?

The company cited strong first-quarter results, including higher sales, margin expansion and increased earnings. It also pointed to a strong orders pipeline and 12-month backlog, and to benefits from Integration 2.0 and portfolio optimization.

What drove the growth in first-quarter results?

Sales growth was driven mainly by the Freight segment, with higher Equipment and Services sales, including higher mining sales and locomotive deliveries. Gross margin improved, and operating expenses grew more slowly than revenue. The Transit segment grew 5.5%, driven by higher OE and aftermarket sales.

How did the difference between GAAP and adjusted results arise?

Adjusted results exclude restructuring and portfolio optimization costs ($0.05 per share in Q1 2024) and non-cash amortization expense ($0.31 per share). GAAP diluted EPS was $1.53 and adjusted diluted EPS was $1.89.

Is the company's backlog growing?

The 12-month backlog grew 11.3% to $7.71 billion, while total multi-year backlog fell 1.1% to $22.08 billion. Excluding foreign currency, multi-year backlog decreased $310 million, or 1.4%.

How strong is the company's cash generation and balance sheet?

Operating cash flow was $334 million, with an 84% cash conversion rate. Total debt rose to $4.00 billion from $3.29 billion at December 31, 2023 (long-term debt), and the debt leverage ratio was 1.7x versus 2.3x a year earlier.

WAB 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed April 24, 2024. Cited figures are marked; the original filing is the authoritative source.

Wabtec Corporation (NYSE: WAB) furnished this Form 8-K on April 24, 2024 to report its first quarter 2024 results and updated full-year 2024 guidance, under Item 2.02 (Results of Operations and Financial Condition) and Item 7.01 (Regulation FD Disclosure).

The attached press release reports sales of $2.50 billion^a, up 13.8% year over year, GAAP earnings per diluted share of $1.53 (up 64.5%), and adjusted earnings per diluted share of $1.89 (up 47.7%). GAAP operating margin was 16.5% and adjusted operating margin was 19.8%, up 3.4 points. Freight segment sales rose 17.2% to $1.82 billion, while Transit segment sales rose 5.5% to $673 million.

Cash flow from operations was $334 million^b, compared with negative $25 million in the prior-year quarter, and the company reported an 84% operating cash flow conversion rate. The company returned $211 million to shareholders through share repurchases ($175 million) and dividends ($36 million). Total debt was $4.00 billion at March 31, 2024, and total available liquidity was $2.13 billion.

The 12-month backlog rose 11.3% to $7.71 billion^c, while total backlog declined 1.1% to $22.08 billion. The company raised its 2024 guidance: sales are now expected between $10.25 billion and $10.55 billion (previously $10.05 billion to $10.35 billion), and adjusted EPS between $7.00 and $7.40 (previously $6.50 to $6.90).

Operating cash flow conversion is still expected to exceed 90%^d. The company did not provide a quantitative reconciliation of forecasted GAAP EPS to adjusted EPS, citing the unreasonable efforts exemption because restructuring, acquisition-related, and certain regulatory, legal, and tax items are difficult to predict.

02—Key points

Key Highlights

Q1 2024 sales of $2.50 billion, up 13.8% year over year, led by the Freight segment (up 17.2% to $1.82 billion).
GAAP EPS of $1.53 (up 64.5%) and adjusted EPS of $1.89 (up 47.7%); GAAP operating margin of 16.5% and adjusted operating margin of 19.8%.
Operating cash flow of $334 million versus negative $25 million a year earlier, an 84% cash conversion rate.
2024 adjusted EPS guidance raised to $7.00–$7.40 from $6.50–$6.90; sales guidance raised to $10.25–$10.55 billion from $10.05–$10.35 billion.
12-month backlog up 11.3% to $7.71 billion; total backlog down 1.1% to $22.08 billion.
Returned $211 million to shareholders through $175 million in share repurchases and $36 million in dividends.
Total debt of $4.00 billion at March 31, 2024, with total available liquidity of $2.13 billion.

03—Questions

Frequently Asked Questions

Why did Wabtec raise its 2024 guidance?
The company cited strong first-quarter results, including higher sales, margin expansion and increased earnings. It also pointed to a strong orders pipeline and 12-month backlog, and to benefits from Integration 2.0 and portfolio optimization.
What drove the growth in first-quarter results?
Sales growth was driven mainly by the Freight segment, with higher Equipment and Services sales, including higher mining sales and locomotive deliveries. Gross margin improved, and operating expenses grew more slowly than revenue. The Transit segment grew 5.5%, driven by higher OE and aftermarket sales.
How did the difference between GAAP and adjusted results arise?
Adjusted results exclude restructuring and portfolio optimization costs ($0.05 per share in Q1 2024) and non-cash amortization expense ($0.31 per share). GAAP diluted EPS was $1.53 and adjusted diluted EPS was $1.89.
Is the company's backlog growing?
The 12-month backlog grew 11.3% to $7.71 billion, while total multi-year backlog fell 1.1% to $22.08 billion. Excluding foreign currency, multi-year backlog decreased $310 million, or 1.4%.
How strong is the company's cash generation and balance sheet?
Operating cash flow was $334 million, with an 84% cash conversion rate. Total debt rose to $4.00 billion from $3.29 billion at December 31, 2023 (long-term debt), and the debt leverage ratio was 1.7x versus 2.3x a year earlier.

04—Continue

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