“The breadth of our product portfolio combined with our multi-year backlog provides us with a solid foundation for growth in 2022,” Wabtec Corp. President and CEO Rafael Santana said during a fourth-quarter and full-year 2021 earnings announcement on Feb. 16; he noted that the company’s FLXdrive battery-electric locomotive is “gaining traction.”
For fourth-quarter 2021, Wabtec GAAP earnings per diluted share of $1.02 rose 121.7% from the prior-year period’s $0.46; adjusted, they were $1.18, up 20.4% from $0.98.
Sales came in at $2.07 billion, a 2.4% increase over the 2020 quarter’s $2.02 billion. The company attributed this to “higher Freight segment sales, partially offset by Transit segment sales. During the quarter, we estimate that sales results were adversely impacted by 3%-4% due to supply chain disruptions.”
Freight segment sales for the three-months ending Dec. 31, 2021 were $1.425 billion, up 6.4% from the same point in 2020. This was driven by “demand for Services [up 21.2%] and Components [up 11.8%], along with the acquisition of Nordco [in second-quarter 2021],” Watco reported. “This growth was partially offset by lower deliveries of locomotives and increased supply chain disruptions.”
For fourth-quarter 2021, Transit segment sales of $648 million were down 5.4% from the prior-year period. The company attributed this to “supply chain issues, COVID-related disruptions and unfavorable foreign currency exchange.”
Wabtec noted that in fourth-quarter 2021, both GAAP and adjusted operating margin increased from 2020 “as a result of improved mix and strong productivity, partially offset by $20 million to $25 million in escalating costs associated with metals, transportation and labor.” Additionally, GAAP and adjusted EPS “increased from the year-ago quarter primarily due to higher sales and increased income from operations. GAAP EPS further benefited from a favorable effective tax rate, along with lower restructuring and transaction costs.”
Wabtec’s full-year 2021 earnings per diluted share came in at $2.96, up 36.4% from 2020; adjusted, they were $4.26, up 12.4%. Total 2021 sales reached $7.82 billion and cash from operations was $1.07, a “record high,” according to the company.
At December 31, 2021, the multi-year backlog was $578 million higher than December 31, 2020, Wabtec said, “due in most part from increased orders for Freight Equipment and Freight Services.”
Wabtec reported that it expects 2022 sales to be in a range of $8.30 billion to $8.60 billion, and adjusted earnings per diluted share to be in a range of $4.65 to $5.05. For full-year 2022, the company anticipates “strong cash flow generation with operating cash flow conversion of greater than 90%.”
Additionally, Wabtec said it is “not presenting a quantitative reconciliation of our forecasted GAAP earnings per diluted share to forecasted adjusted earnings per diluted share as we are unable to predict with reasonable certainty and without unreasonable effort the impact and timing of restructuring-related and other charges, including acquisition-related expenses and the outcome of certain regulatory, legal and tax matters. The financial impact of these items is uncertain and is dependent on various factors, including timing, and could be material to our Consolidated Statements of Earnings.”
“The Wabtec team delivered strong execution to close out the year, providing us with momentum into 2022,” Rafael Santana said. “Our productivity initiatives, realization of synergies and positive mix drove improvement in segment margins for both the fourth quarter and full year despite growing supply chain disruptions and higher costs. Our strong performance in 2021 was complemented by disciplined capital allocation including $300 million in share repurchases, $92 million in dividends and two strategic bolt-on acquisitions that enhance our business with attractive end-market opportunities.
“Wabtec delivered significant progress against our strategic initiatives that will create value for our customers and shareholders. Wabtec’s FLXdrive battery electric locomotive is gaining traction with our customers as they seek solutions that reduce emissions and improve efficiencies. [For more, read: “UP Acquiring 20 Battery-Electrics for Yard Service”; “BHP Group Orders Battery-Electric Locomotives From Wabtec”; “Wabtec Lands FLXdrive Order From Australian Mining Company”; “CN Orders Wabtec FLXdrive”; and “FLXdrive ‘Electrifies’ Pittsburgh.”]
“Looking forward, we see mixed market conditions improving throughout the year. … Our announced $750 million share buyback reauthorization and 25% increase in the dividend underscore our confidence on continued strong earnings and cash flow generation. We believe we are well-positioned to deliver top-line growth, margin expansion and increased earnings in 2022.”
The Cowen Insight: ‘Results Affirm Both our Caution Into Print and Overall Constructive View’
“The revenue and EPS guidance midpoints are just shy of consensus, but we believe a good deal of conservatism may be baked in,” Cowen and Company Transportation Equipment Analyst Matt Elkott reported. “Both the 12-month and total backlogs grew sequentially and year-over-year. In four-quarter 2021, revenue was a little light, but EPS was a penny above consensus on a better-than-expected operating margin.”
Among the key Cowen takeaways:
• “The company sees mixed market conditions improving throughout the year.
• “Company commentary on freight segment: Freight segment sales for the fourth quarter were driven by demand for Services and Components, along with the acquisition of Nordco. This growth was partially offset by lower deliveries of locomotives and increased supply chain disruptions. Both GAAP and adjusted operating margin benefited from higher sales, favorable mix and operational efficiencies, partially offset by higher costs. GAAP operating margin also improved year-over-year as a result of lower restructuring and transactions costs.
• “Company commentary on transit segment: Transit segment sales for the fourth quarter were down versus last year due to supply chain issues, COVID-related disruptions and unfavorable foreign currency exchange. Both GAAP and adjusted segment operating margin improved versus last year primarily driven by mix and productivity gains, partially offset by higher costs. GAAP operating margin further benefited from lower year-over-year restructuring and transaction costs.
• “This was another solid transit performance. Please see ‘In Pandemic Fight, Public Transit Is Part of the Solution, Not the Problem.’”