Wabtec tops estimates on higher margins and backlog growth

[Wabtec Corporation building in Pittsburgh, Pennsylvania, USA.]
JHVEPhoto/iStock Editorial via Getty Images

Shares of Wabtec (NYSE:WAB [https://seekingalpha.com/symbol/WAB]) were little changed in premarket trading Wednesday after the rail equipment manufacturer reported [https://seekingalpha.com/news/4506530-westinghouse-air-brake-beats-top-line-and-bottom-line-estimates-updates-fy25-outlook] third-quarter earnings that topped Wall Street expectations and raised its full-year profit guidance, supported by strong demand in both its freight and transit segments.

The company posted adjusted earnings of $2.32 a share, above analyst estimates of $2.28 a share, and GAAP earnings of $1.81 per share, compared with expectations of $2.01 per share. Revenue rose 8.4% to $2.89 billion, narrowly beating consensus estimates of $2.88 billion.

Wabtec reported a GAAP operating margin of 17.0% and an adjusted operating margin of 21.0%, up 130 basis points from a year earlier, reflecting strong performance in its freight and transit businesses. The company’s multi-year backlog grew 15% to a record $25.6 billion, while its 12-month backlog rose 8.4%, underscoring continued strength in long-term demand.

“The Wabtec team delivered a very strong quarter, evidenced by continued growth in our backlog, sales, margin and earnings,” Rafael Santana, Wabtec’s president and chief executive, said in a statement. “Our team’s commitment to product innovation, disciplined cost management and partnership with customers has been instrumental in driving our ongoing success.”

SEGMENT PERFORMANCE

The freight segment, which includes locomotives, digital solutions and components, posted sales of $2.09 billion, up 8.4% from a year earlier. Equipment sales jumped 32%, and digital segment revenue climbed 45.6%, driven by the acquisition of Inspection Technologies. Adjusted operating margin in the freight segment rose to 24.5%, while GAAP margin was 19.8%.

The transit segment delivered sales of $793 million, up 8.2%, driven by growth in both original equipment and aftermarket sales. Adjusted operating margin improved to 15.5%, up 270 basis points, reflecting stronger pricing and operational efficiency.

CASH FLOW AND BALANCE SHEET

Operating cash flow came in at $367 million, down from $542 million in the year-ago period, reflecting higher working capital and tariff costs. Wabtec (NYSE:WAB [https://seekingalpha.com/symbol/WAB]) ended the quarter with $528 million in cash and total debt of $5.29 billion. Available liquidity stood at $2.75 billion, including $2 billion in credit capacity.

OUTLOOK

On the back of its strong results, Wabtec (NYSE:WAB [https://seekingalpha.com/symbol/WAB]) raised and tightened its 2025 adjusted EPS guidance to a range of $8.85 to $9.05, up $0.10 at the midpoint. That compares with a Wall Street consensus of $8.97. The company reaffirmed its revenue outlook of $10.93 billion to $11.23 billion (consensus: $11.07 billion) and said it expects operating cash flow conversion above 90%.

Santana said the company’s multi-year backlog and ongoing investments in innovation position Wabtec for continued profitable growth “even in a dynamic and uncertain economic environment.”

As of early Wednesday, Wabtec shares were flat in premarket trading, holding near recent highs after gaining roughly 4.4% so far in 2025.

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