Tuesday, July 25, 2017

Wabtec 2Q: Sales up, guidance revised

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

Wabtec Corp. in reporting results on July 25 for the second quarter of 2017, noted a sales increase of nearly 30% and revised its guidance for the remainder of 2017 to reflect challenging market conditions.

Second-quarter sales were $932 million, a 29% increase compared to the year-ago quarter, as higher sales in the Transit Group more than offset lower sales in the Freight Group. Transit sales increased due to the Faiveley Transport acquisition. Freight sales were affected mainly by lower revenues from freight car and locomotive components, and a slower-than-expected ramp-up of certain projects. Changes in foreign exchange rates reduced sales by $15 million compared to the year-ago quarter.

Income from operations was $114 million, or 12.2% of sales, including restructuring and transaction expenses of $9 million related to the Faiveley integration and ongoing cost-reduction activities. Excluding these expenses, the company’s operating margin was 13.2%, similar to its adjusted operating margin in the first quarter of this year.

Net interest and other expense was $17 million, reflecting a higher debt balance due mainly to the Faiveley acquisition and a non-cash foreign exchange loss. Net interest expense included a $2 million benefit related to the prepayment of debt assumed in the Faiveley acquisition. Income tax expense was $25 million, with an effective tax rate of 25.4%.

Earnings per diluted share were $0.75. Wabtec said the net effect of the restructuring and transaction expenses and the interest expense benefit reduced earnings per diluted share by $0.05. On June 30, the company had cash of $329 million and debt of $2 billion.

During the quarter, Wabtec’s total, multi-year backlog increased 10% compared to the first quarter, to a record $4.5 billion. New orders included more than $350 million for Transit Group projects in Europe and Australia, and more than $60 million for train control and signaling projects with the Belt Railway Co. in Chicago and the South Florida Regional Transportation Authority.

Also during the quarter, Wabtec acquired Thermal Transfer, a manufacturer of heat exchangers for industrial markets, with sales of about $25 million; and Semvac, a manufacturer of sanitation systems for locomotives and transit vehicles, with sales of about $15 million.

Compared to the first two quarters of the year, Wabtec said it “expects modest improvement in third quarter results and a stronger fourth quarter, with an adjusted operating margin target in the fourth quarter of about 15%. For the full year, based on the revised timing of sales and projects already in backlog, market conditions rebounding slower than expected, and the expected ramp-up of synergies from the Faiveley integration, sales are now expected to be about $3.85 billion and adjusted earnings per diluted share is expected to be between $3.55 and $3.70, excluding expected restructuring and transaction expenses, and non-controlling interest related to the Faiveley acquisition.”

“We remain confident in our future growth opportunities, even as we manage aggressively through our short-term challenges,” said Wabtec President and CEO Raymond T. Betler. “In transit, we have a record and growing backlog, with significant projects in all major markets around the world, and we are making meaningful progress in the Faiveley integration, with margins improving during the year. In freight, our backlog has now increased for three consecutive quarters, and demand appears to be stable in our key markets. Finally, we continue to invest in our balanced growth strategies, including new products and acquisitions, around the world.”








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