Solid Liquidity Boosts Wabtec (WAB) Amid High Capital Expense – March 1, 2022
We recently updated a report on Westinghouse Air Brake Technologies Corporation (WAB – free report).
The company ended the fourth quarter of 2021 with cash and cash equivalents of $473 million, significantly above the current debt of $2 million. This indicates that the company has enough cash to meet its current debts. Moreover, its current ratio (a measure of liquidity) at the end of the December quarter stood at 1.32, higher than the reading of 1.20 at the end of 2020.
Wabtec forecasts 2022 sales in the range of $8.3 billion to $8.6 billion. Total sales recorded in 2021 were $7.82 billion. Factors such as favorable mining fundamentals, higher railcar construction and improving industrial end markets contributed to the better projection.
Wabtec reports $52 million in capex in the fourth quarter of 2021. For 2021, capex would be $131 million (above the $120 million forecast). High capital expenditures could hurt the company’s already weak bottom line. Due to higher operating expenses (up 12.5% in the fourth quarter), the operating ratio (operating expenses, as a percentage of revenues) deteriorated by 170 basis points compared to the figure for the prior year quarter at 18.7%.
Zacks Ranking and Stocks to Consider
Wabtec currently carries a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some higher ranked stocks within the broader Zacks Transportation sector are JB Hunt Transport Services, Inc. (JBHT – Free Report), Union Pacific Corporation (UNP – Free report) and Triton International Limited (TRTN – Free report) .
The expected long-term (three to five years) EPS growth rate for J.B. Hunt is set at 15%. JBHT benefited from solid performances in all its segments. While the Dedicated Contract Services (DCS) unit is aided by improved fleet productivity and an increase in the average number of revenue-generating trucks, the Integrated Capacity Solutions (ICS) unit benefits from a combination favorable customer freight rates as well as higher contract and spot rates. .
JBHT’s measures to reward shareholders are encouraging. Driven by tailwinds, the stock has risen 34.7% over the past year. JB Hunt currently sports a Zacks rank #1 (strong buy). You can see the full list of today’s Zacks #1 Rank stocks here.
The expected long-term (three to five years) EPS growth rate for Union Pacific is set at 10%. With the acceleration of economic activity, freight revenues (representing the bulk of turnover) are improving. Freight revenue increased 11% year-over-year in 2021. By segment, freight revenue in 2021 increased 12%, 11% and 11% in bulk, industrial and premium units, respectively.
Driven by tailwinds, the stock has risen 17.6% over the past year. UNP currently wears a Zacks Rank #2 (Buy).
The expected long-term (three to five years) EPS growth rate for Triton is set at 10%. The gradual increase in trade volumes and container demand bodes well for the company. With the easing of coronavirus-related restrictions in the United States and Europe, the company saw a strong rebound in business in the third and fourth quarters of 2020 as well as each of the four quarters of 2021.
Driven by tailwinds, the stock has risen 13.6% over the past year. TRTN currently wears a Zacks Rank #2.