During the second quarter, Westinghouse Air Brake Technologies (NYSE:WAB), or Wabtec, benefited from a full quarter of its acquisition of GE's (NYSE:GE) former transportation division. That transaction paid immediate dividends by driving a significant improvement in the company's revenue and adjusted earnings. Meanwhile, it remains on track with integrating the business, which gave it the confidence to boost its full-year cash flow forecast.

Wabtec's results: The raw numbers


Q2 2019

Q2 2018



$2.2 billion

$1.1 million


Adjusted net income

$203.1 million

$93.3 million


Adjusted earnings per share




Data source: Westinghouse Air Brake Technologies.

What happened with Wabtec this quarter? 

The GE deal drove the quarter:

  • Sales from Wabtec's freight group skyrocketed 262% from the year-ago period to $1.5 billion, due entirely to the addition of GE's former transportation unit. Overall, the deal added $1.1 billion in new revenue, which more than offset a $34 million decline in organic sales and a $6 million impact from exchange-rate fluctuations.
  • Transit group revenue rose 6% year over year to $742 million. The company organically grew transit sales by $81 million while adding another $3 million via acquisitions. Those factors more than offset a $41 million negative impact of foreign currency changes.
  • The GE deal helped power earnings growth. While Wabtec's adjusted net income more than doubled, it only grew by about 10% on a per-share basis. That's mainly due to the number of shares the company issued to GE to complete the transaction.
  • Overall, Wabtec issued 47.8 million shares to GE, 25.3 million of which it sold during the second quarter. GE is considering selling the rest of its Wabtec holdings in the third quarter to further bolster its balance sheet.
  • Wabtec generated $431 million in cash from operations during the second quarter. That's up sharply from the $44 million it produced in the year-ago period because of improved working-capital performance and increased customer deposits.
  • It used most of that cash to reduce debt, paying off $330 million during the quarter. The company ended the period with $461 million in cash and $4.63 billion of debt.
A freight train in a rail yard at dusk.

Image source: Getty Images.

What management had to say 

CEO Rafael Santana commented on the results:

Our second-quarter results demonstrate a solid operating performance, with strong cash from operations and margin improvement, enabling significant debt reduction. In light of conditions in the North American freight market, we have accelerated our cost reductions and synergy initiatives. We are already beginning to reap strategic benefits from the merger of Wabtec and GE Transportation, completed just a few months ago.

Wabtec's acquisition of GE's former transportation business significantly bolstered freight operations, which helped drive strong growth during the quarter. Meanwhile, the company remains on track with its target to capture $250 million in merger synergies by year four, further boosting to its bottom line.

Looking forward 

With Wabtec more than halfway through 2019, it now has a better idea of how it should perform. That led the company to update its full-year guidance. It now expects $8.3 billion in sales, slightly less than its previous view of $8.4 billion in revenue. And it now anticipates adjusted earnings between $4.10 to $4.20 per share (up 9% year over year at the midpoint). That's a much narrower range than its prior guidance of $4 to $4.25 per share (a 7% year-over-year increase at the midpoint). The company also boosted its full-year cash flow guidance to $900 million, up from its prior range of $500 million to $600 million.

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