On Thursday, KeyBanc maintained its Overweight rating on Wabtec Corporation (NYSE:WAB) and increased the price target to $185 from $155. The adjustment follows Wabtec's strong performance in the first quarter of 2024 and the company's raised guidance for the full year. The analyst highlighted Wabtec's success in outperforming market expectations after announcing its quarterly results earlier in the week.
The North American locomotive cycle is currently at a low point, but it is expected to benefit from the transitioning fleets of Class 1 railroads. Wabtec's international business is also performing well, and there is potential for further margin growth within its Transit segment. These factors are bolstered by a substantial backlog valued at $22 billion, with a near-term record high of $7.7 billion.
Wabtec's diversified business model is anticipated to support mid-single-digit organic growth. The possibility of mergers and acquisitions could further enhance growth by several percentage points annually. In favorable market conditions, Wabtec is positioned to achieve high-single-digit revenue growth even before any significant legislative changes occur.
KeyBanc's confidence in Wabtec's operational momentum and execution capabilities underpins the belief that the company can achieve a normalized incremental margin in the mid-20% range. This has led to an increase in the earnings per share estimate for 2025 to $7.95 and the introduction of a new estimate for 2026 at $8.91.
The firm's unique business model and competitive advantages, along with its apparent reduced cyclicality, provide the basis for the raised price target. The analyst notes that while a positive outcome in the ongoing California Air Resources Board (CARB) case could further enhance near to medium-term earnings, the current outlook remains strong even without such a ruling.
InvestingPro Insights
As Wabtec Corporation (NYSE:WAB) continues to impress with its robust performance, real-time data from InvestingPro provides additional context for investors. The company's market capitalization stands at a healthy $28.82 billion, reflecting its significant presence in the industry. With a P/E ratio of 28.95, Wabtec is trading at a high earnings multiple, which suggests that investors are expecting high future earnings growth relative to the market. This is further substantiated by the company's revenue growth of 15.66% over the last twelve months as of Q1 2024, showcasing its ability to expand successfully.
InvestingPro Tips indicate that Wabtec's stock is currently in overbought territory according to the RSI, which could signal a potential pullback or consolidation in the near future. However, investors might also consider the company's impressive return over the last week, month, three months, and year, which are indicative of strong investor confidence and momentum. For those interested in Wabtec's financial health, it operates with a moderate level of debt and has maintained dividend payments for 30 consecutive years, demonstrating a commitment to returning value to shareholders. Additionally, the company is trading near its 52-week high, which aligns with KeyBanc's optimistic outlook and increased price target.
For more detailed analysis and additional InvestingPro Tips on Wabtec, interested readers can explore the insights available on InvestingPro. Plus, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 14 additional InvestingPro Tips available for Wabtec, which could further guide investment decisions for those looking at this company.
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