Key Points
- Q2 2024 sales increased by 9.8% year over year, reaching $2.64 billion.
- GAAP diluted EPS soared 54.7% to $1.64.
- The company raised its adjusted EPS guidance for 2024 to between $7.20 and $7.50 (up 24% at the midpoint).
Locomotive and transit system manufacturer Westinghouse Air Brake Technologies (WAB -1.61%) (Wabtec) reported second-quarter 2024 earnings on Wednesday that confirmed strong performance. Sales jumped nearly 10% to $2.64 billion, driven by robust growth in its Freight segment. GAAP diluted earnings per share (EPS) increased a strong 54.7% year over year to $1.64, while adjusted EPS grew by 39% to $1.96.
These results surpassed management’s prior expectations, confirming the company's positive outlook for the fiscal year.
| Metric | Q2 2024 | Management Guidance | Q2 2023 | Change (YOY) |
|---|---|---|---|---|
| Total sales | $2.64 billion | $2.50 billion | $2.41 billion | 9.8% |
| Diluted EPS | $1.64 | $1.53 | $1.06 | 54.7% |
| Adjusted EPS | $1.96 | $1.89 | $1.41 | 39% |
| Operating margin | 16.3% | 12.6% | 12.9% | 3.4 pps |
| Adjusted operating margin | 19.3% | 16.4% | 16.4% | 2.9 pps |
Source: Management guidance provided on April 24, 2024. YOY = Year over year.
About Wabtec
Westinghouse Air Brake Technologies, commonly known as Wabtec, specializes in innovative freight and transit system solutions. Its primary business segments include Freight and Transit. The company focuses on delivering high-margin aftermarket services and incorporating advanced technology such as battery-electric and hydrogen-powered locomotives.
Recent strategies emphasize investments in sustainable technologies and digital transformation, key success factors that have driven the company’s growth. Strategic acquisitions, such as Faiveley Transport and GE Transportation, continue to play a crucial role in expanding Wabtec’s market presence and technological capabilities.
Q2 performance highlights
Wabtec's Q2 2024 was marked by strong financial results. The Freight segment led the growth with sales rising by 13.1% year over year to $1.92 billion, while the Transit segment posted a modest growth of 2%, reaching $724 million.
GAAP gross margin for the quarter improved to 33% from 30.1% in Q2 2023, benefiting from higher sales volumes and effective cost management. Operating margins also saw a significant boost, with GAAP operating margin increasing to 16.3% and adjusted operating margins rising to 19.3%.
The company's strong sales growth and margin improvements were the primary drivers of Wabtec's EPS gains. Operating cash flow for Q2 2024 also surged to $235 million compared to $115 million in the prior year period, reflecting better operational efficiency.
The Freight segment’s performance was a standout, with a GAAP gross margin increase from 31.8% to 34.8% and an adjusted operating margin improvement from 20.3% to 24.1%. This growth was driven by strong demand in Equipment and Components, which rose by 36.4% and 17.5% year over year, respectively.
Meanwhile, the Transit segment, though smaller in size compared to Freight, saw its GAAP gross margin rise from 26% to 28.3%, with adjusted operating margin moving from 11.1% to 12.7%. The growth in this segment was primarily due to higher aftermarket sales, which typically generate higher margins and are less sensitive to economic cycles.
Wabtec also reported a healthy increase in its 12-month backlog, which grew by 1.6% to $7.334 billion, providing better revenue visibility. However, the total backlog saw a slight decrease of 1.6%, standing at $22.1 billion due to timing and order fluctuations.
Looking ahead
Based on the strong performance in Q2 2024, Wabtec raised its adjusted EPS guidance for the full year to a range of $7.20 to $7.50, up approximately 24% from 2023 at the midpoint. The revenue guidance remains unchanged at $10.25 billion to $10.55 billion. Management expects operating cash flow conversion to be greater than 90% for the full year.
Investors should keep an eye on Wabtec's ongoing efforts in developing sustainable technologies and its strategic moves within both the Freight and Transit segments. Wabtec said it aims to sustain its growth trajectory while navigating potential risks such as regulatory changes and market fluctuations.
