Please ensure Javascript is enabled for purposes of website accessibility

Acquisitions and Taxes Impact Westinghouse Air Brake Technologies Corp's Fourth-Quarter Results

By Matthew DiLallo - Feb 20, 2018 at 1:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The rail products and services provider expects a smoother ride in 2018.

As previously warned, Westinghouse Air Brake Technologies' (WAB 0.35%), or Wabtec, fourth-quarter results came in a bit under expectations due to the impact of the recent changes to the U.S. tax law as well as some added expenses relating to its acquisition of Faively Transportation. That said, those same two items position the company for a stronger showing in 2018.

Wabtec's results: The raw numbers


Q4 2017

Q4 2016

Year-Over-Year Change


$1.08 billion

$760 million


Net income

$48.9 million

$37.8 million


Earnings per share




Data source: Westinghouse Air Brake Technologies Corp.

What happened with Wabtec this quarter?

Taxes and Faiveley Transport had an impact on the quarter:

  • Sales in Wabtec's transit group surged 70% from the year-ago quarter to $711.9 million. Acquisitions led by Faively Transport added $192 million to the top line, while organic sales grew $88 million. Sales in the freight segment, meanwhile, rose a more modest 7% year over year to $363.6 million. Acquisitions also drove the increase by adding $27 million in revenue during the quarter.
  • Those results pushed Wabtec's revenue to $3.88 billion for the full-year, which was 32% higher than 2016 and ahead of its revised guidance for $3.8 billion in sales. Acquisitions were the sole factor driving revenue higher, adding $1.18 billion to the top line, which more than offset a $227 million decrease in organic sales.
  • While earnings appeared to soar versus the year-ago period, there's a bit more to that story. For starters, profits in the fourth quarter of 2016 had plunged due to several one-time charges relating to the Faiveley Transport deal and would have been $0.39 per share higher without that impact. Meanwhile, this year's fourth quarter also experienced several one-time charges that weighed on results, including $0.18 per share in contract adjustments, $0.13 per share due to restructuring and integration actions, and $0.08 per share as a result of changes to the tax law. These factors reduced earnings by $0.39 per share in the current quarter. If adjusted for those items, full-year earnings would have been $3.43 per share, which came in under the company's $3.45 to $3.50 per share guidance range and even further below its initial forecast.
  • Wabtec generated $162 million in cash flow from operations during the quarter, which was its highest level of the year.
  • The company used its balance sheet strength to make three acquisitions, which currently generate about $85 million in combined annual sales.
  • The company continued booking new orders, which increased its backlog 2% to a record $4.6 billion.
A transit train in motion at a station.

Image source: Getty Images.

What management had to say

CEO Raymond Belter commented on the company's results, saying:

After a year of transition in 2017, during which we made excellent progress on the Faiveley integration and continued to invest in our worldwide growth opportunities, we are confident the company is positioned for improved performance in 2018. We have a record backlog, we're seeing improvements in the freight aftermarket, and our Wabtec Excellence Program provides the fuel to increase margins over time. We are committed to achieving our 2018 plan and excited about Wabtec's long-term growth prospects.

Last year didn't quite go as Wabtec planned. Revenue and earnings came in well short of its initial guidance due to some unexpected costs and headwinds in the rail sector earlier in the year, which caused organic sales to slip. However, the company believes it can put those problems behind it in 2018 and deliver better financial performance.

Looking forward

That's evident in the company's guidance, with it anticipating that revenue will rise to about $4.1 billion this year, up 6% from 2017. Adjusted earnings, likewise, should also head higher this year. While Wabtec anticipates that profits in the first quarter will be about even with the fourth quarter of 2017, the company expects to pull in $3.80 per share for the full year, which would be 11% higher than last year, thanks in part to the lower tax rate.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Westinghouse Air Brake Technologies Corporation Stock Quote
Westinghouse Air Brake Technologies Corporation
$85.35 (0.35%) $0.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.