Tuesday, April 25, 2017

Wabtec 1Q: Transit gains offset freight decline; guidance affirmed

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Wabtec President and CEO Raymond T. Betler Wabtec President and CEO Raymond T. Betler

Wabtec Corp., in reporting results for 2017’s first quarter, noted that higher Transit Group sales offset lower Freight Group figures. The company also affirmed financial guidance for 2017.

Sales for the first quarter were $916 million, with higher sales in the Transit Group increasing mainly due to the Faiveley Transport acquisition, while Freight Group sales were affected mainly by lower revenues from train control-related equipment and services, and lower industry deliveries of new freight cars and locomotives, Wabtec noted. Changes in foreign exchange rates reduced sales by $25 million compared to the year-ago quarter.

Income from operations in the first quarter was $115 million, including restructuring and transaction expenses of $8.9 million related mainly to the Faiveley integration and ongoing cost reduction activities. Net interest and other expense was $15 million in the first quarter, reflecting a higher debt balance due to the Faiveley acquisition. Income tax expense was $27 million in the first quarter, with an effective tax rate of 27.6%. This included an expense of $2.1 million for an adjustment related to the Faiveley acquisition.

Earnings per diluted share in the first quarter were 77 cents. Wabtec said the net effect of the restructuring and transaction expenses, tax adjustment and non-controlling interest related to the Faiveley acquisition reduced earnings per diluted share by 7 cents. On March 31, the company had cash of $280 million and debt of $1.87 billion.

Wabtec affirmed its 2017 financial guidance, with revenues expected to be about $4.1 billion and adjusted earnings per diluted share expected to be between $3.95 and $4.15, excluding expected restructuring and transaction expenses, and non-controlling interest related to the Faiveley acquisition. “Due to the ramp up of projects already in backlog and the timing of synergies from the Faiveley acquisition, the company expects its quarterly results to improve sequentially during the rest of the year,” Wabtec said. “Wabtec estimates synergies from the acquisition to be about $15 million to $20 million in 2017, with long-term synergies expected to exceed $50 million.

During the quarter, Wabtec acquired the remaining shares of Faiveley Transport and “made progress on the integration.” Wabtec also acquired Aero Transportation Products, a manufacturer of hatch covers and outlet gates for freight cars with annual sales of about $40 million; and announced the signing of a $97 million contract to provide signaling and communications services to TEX Rail, a new commuter rail line being developed by the Fort Worth Transportation Authority. Following the end of the quarter, Wabtec acquired Thermal Transfer, a manufacturer of heat exchangers for industrial markets, with annual sales of about $25 million; and Semvac, a European-based manufacturer of sanitation systems for transit vehicles, with annual sales of about $15 million.

“Our first quarter adjusted earnings were in line with expectations, and we expect improvement during the year,” said Wabtec President and CEO Raymond T. Betler. “As we work to integrate Faiveley and our other recent acquisitions, we are managing our costs aggressively based on market conditions. We continue to invest in our balanced growth strategies and expect to benefit from our diversified business model and rigorous application of the Wabtec Excellence Program.”


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