Railroads are feeling some pain due to ongoing trade uncertainty, but it is yet to trickle down to the companies to railroad suppliers.
Shares of Wabtec (WAB 0.46%), formerly known as Westinghouse Air Brake Technologies, were trading up 10% at 10:30 a.m. Eastern after the locomotive manufacturer beat quarterly earnings expectations and provided a more optimistic outlook for the full year.
Profitability on the rise
Wabtec manufacturers and services a range of heathy industrial equipment, including rail locomotives. The transportation sector has been in a rut lately as macro issues have caused a pullback in inventories, but companies are still buying Wabtec equipment.
The company earned $2.28 per share in the quarter on revenue of $2.61 billion, beating the consensus profit estimate by $0.25 per share while matching expectations on revenue. Revenue was up 4.5% year-over-year, and Wabtec improved its operating margin by 190 basis points to 22.1%.
Wabtec said that international revenue helped boost results. The growing global fleet is also helping the company to expand the service, components, and digital recurring revenue side of the business.
NYSE: WAB
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Is Wabtec stock a buy?
The company expects the momentum to continue. Wabtec boosted the upper end of its full-year earnings guidance to $8.95 per share from $8.75 per share while keeping the lower end intact.
CEO Rafael Santana said that the company is "approaching the remainder of the year with caution but with the discipline and focus to take the necessary actions to deliver against our commitments in an uncertain and volatile economic landscape."
If conditions worsen, Wabtec is unlikely to be immune from a recession, but the company's long-term strategy to build its global business and lean more on recurring servicing revenue instead of just new equipment sales appears to be paying off. For those with a long-term mindset, Wabtec could be an attractive addition to a diversified portfolio.
