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Westinghouse Air Brake Technologies Corporation WAB, operating as Wabtec Corporation, is benefiting from robust market demand and improved operational efficiency. The shareholder-friendly approach also bodes well for the company. However, high operating expenses are challenging the company’s prospects.
Factors Favoring Wabtec
Wabtec’s $960 million acquisition of Dellner Couplers strengthens its position in the rail industry by adding Dellner’s advanced train connection systems to its portfolio. The deal enhances Wabtec’s transit systems, providing synergies, expanding high-margin revenue streams and accelerating growth. With Dellner’s 84-year legacy and solid financial track record, the acquisition is expected to drive immediate shareholder value, improve operational performance, and support Wabtec’s long-term innovation and sustainability goals in the passenger rail market.
Wabtec’s solid backlog growth demonstrates strong market demand and visibility into future revenues. The 3% increase in the 12-month backlog and a 1.2% rise in the total backlog highlight a positive trend in the company's order book. The 12-month backlog grew by $224 million year over year, reflecting robust customer commitments.
Additionally, the multi-year backlog saw a $273 million increase, confirming the company’s healthy long-term prospects. Excluding foreign currency impacts, these figures show even stronger growth, with a 5.5% rise in the 12-month backlog and 3.6% in the multi-year backlog, reinforcing Wabtec's solid market position and outlook.
Wabtec's commitment to its shareholders is commendable, with consistent returns through dividends and share repurchases. In 2021, the company paid $92 million in dividends and repurchased $300 million in shares. These figures grew to $111 million and $473 million in 2022 and $123 million and $409 million in 2023, respectively. In 2024, WAB returned $1.2 billion to shareholders through share repurchases and dividends. Additionally, the company approved a 25% dividend increase in fourth quarter of 2024 raising it to 25 cents per share, effective March 7, 2025.
Owing to such tailwinds, Wabtec shares have rallied 32.2% year over year, surpassing the Transportation - Equipment and Leasing industry’s 23.5% fall in the same period.
Image Source: Zacks Investment Research
WAB: Key Risks to Watch
Wabtec is grappling with increased operating expenses adversely impacting its prospects. In 2024, operating expenses rose 4.7% year over year, following a 9.7% increase in 2023. The primary driver of these increases has been higher labor costs. Selling, general and administrative (SG&A) expenses grew 9.6% year over year in 2024, largely due to the escalating costs of labor.