What happened

Westinghouse Air Brake Technologies Corp. (WAB 2.17%), better known as Wabtec, fell 21.8% in October, according to data provided by S&P Global Market Intelligence.

Given that the company gave a solid set of results at the end of the month, and its upcoming merger partner, GE Transportation, reported good results as well (General Electric Company (GE 3.19%) also posted third-quarter earnings on Oct. 30), it's fair to argue that the slide in Wabtec's stock price has more to do with sentiment than current trading.

That said, most of the large-cap industrial stocks fell by double digits in October on fears of slowing growth in China and the possibility of a future cyclical slowdown in the U.S. -- both are somewhat contingent upon trade conditions between the U.S. and China. And if the industrial sector is set to slow, then the transportation sector, and specifically railroads, will slow, too --- not good news for Wabtec.

A railcar loaded with wood.

Image source: Getty Images.

So what

If you believe that the industrial sector is set for a sharp slowdown, then the sell-off in Wabtec is justified. There's plenty of anecdotal evidence to suggest a deceleration of growth in China, but that could reverse given government policy or a conciliatory agreement on trade with President Trump.

Meanwhile, there's no hard evidence as yet of a slowdown in the U.S. economy. Similarly, Wabtec's third-quarter earnings saw the company reporting year-over-year revenue growth in both segments for the fourth quarter in a row. "Even with strong revenue growth this year, adjusting for changes in FX, our backlog remains a record high. We won new business in most of our major markets and product areas around the world," according to CEO Raymond Betler.

Ahead of the GE Transportation integration, management demonstrated it can successfully undertake such actions, with CFO David Dugan saying, "Our target for the first three years is at least $50 million and we remain ahead of that pace as we come to the end of year two."

As for GE Transportation, it's becoming increasingly clear that Wabtec agreed to pick it up at a cyclical low point. Although GE Transportation revenue fell 2% in the quarter, the company received 603 locomotive orders compared to just 17 in the same quarter last year, and on a year-to-date basis, locomotive orders are at 1,060 compared to just 80 in the first nine months of 2017.

Now what

Wabtec affirmed its full-year guidance and end market conditions remain favorable, for now at least. The Faively integration is going well, and with preparations being made for the GE Transportation merger to be completed by early 2019, there's a lot for Wabtec to look forward to.

The stock price will, of course, be influenced by market perceptions of the risk to the global economy of slowing economic growth -- particularly trade growth -- but those fears may turn out to be unjustified.