Fourth-quarter sales and revenues were $19.1 billion , an all-time quarterly record and up 18% year over year. Creed and CFO Andrew Bonfield said results came in better than expected, primarily due to higher-than-anticipated volume in Power and Energy, where Caterpillar shipped more product than planned at year-end.Caterpillar’s backlog grew to a record $51 billion , up $21 billion , or 71% , from the prior year. Creed said “robust ordering activity across all three primary segments” contributed to the incr ...

Core Insights - Westinghouse Air Brake Technologies Corporation (WAB) has a market capitalization of $38.7 billion and is a global provider of technology-based solutions for the freight rail and passenger transit industries [1] Financial Performance - WAB is expected to report an adjusted EPS of $2.07 for fiscal Q4 2025, reflecting a 23.2% increase from $1.68 in the same quarter last year [2] - For fiscal 2025, analysts predict an adjusted EPS of $8.95, which represents an 18.4% growth from $7.56 in fiscal 2024 [3] - In Q3 2025, WAB reported sales growth of 8.4% to $2.89 billion and an adjusted EPS of $2.32, while raising its full-year 2025 adjusted EPS guidance to a range of $8.85 to $9.05 [5] Stock Performance - Over the past 52 weeks, WAB shares have increased by 19.9%, slightly outperforming the S&P 500 Index's gain of 19.7%, but lagging behind the State Street Industrial Select Sector SPDR ETF's return of 23.4% [4] Analyst Ratings - The consensus view on WAB stock is cautiously optimistic, with a "Moderate Buy" rating. Among 13 analysts, eight suggest a "Strong Buy" and five recommend a "Hold" [6] - The average analyst price target for WAB is $233.83, indicating a potential upside of 2.7% from current levels [6]

Core Viewpoint - GATX Corp. and Brookfield Infrastructure Partners have received regulatory approvals to acquire Wells Fargo's rail operating lease portfolio, with the transaction expected to close around January 1 [1]. Group 1: Transaction Details - The joint venture will purchase approximately 105,000 railcars for $4.4 billion, with Brookfield acquiring about 23,000 cars and 400 locomotives from Wells Fargo [2]. - GATX will hold a 30% stake in the joint venture and will manage the equipment involved in the transactions, with an option to acquire full ownership in the future [2].

Core Insights - Westinghouse Air Brake Technologies Corporation (WAB) has a market cap of $33.8 billion and is a leading provider of technology and services for the freight rail and passenger transit industries [1] - WAB's stock has underperformed compared to the S&P 500 Index over the past year, with a 1.1% increase versus the index's 12.3% gain [2] - The company reported a revenue increase of 8.4% to $2.89 billion in Q3 2025, with adjusted EPS rising 16% to $2.32, despite a decline in operating cash flow [4] Financial Performance - WAB's multi-year backlog has grown to $25.6 billion, indicating strong future revenue potential [4] - Analysts project an 18.3% year-over-year increase in adjusted EPS for the current fiscal year, reaching $8.94 [5] - The company has a mixed earnings surprise history, surpassing estimates in three of the last four quarters [5] Analyst Ratings and Price Targets - WAB has a consensus "Moderate Buy" rating, with seven "Strong Buys" and six "Holds" among 13 analysts [5] - Citi has restated its "Buy" stance with a price target of $225, while the mean price target of $229.54 suggests a 16.2% upside from current prices [6] - The highest target from analysts is $257, indicating a potential upside of 30.1% [6]

Core Insights - Wabtec Corporation reported strong third-quarter adjusted earnings, exceeding analyst expectations with adjusted earnings per share of $2.32 compared to estimates of $2.28, and revenue of $2.89 billion, slightly above the expected $2.88 billion [1][2] Financial Performance - Adjusted operating margin expanded by 130 basis points to 21.0%, driven by higher volumes and improved cost efficiency [2] - Total backlog reached $25.6 billion, with a 12-month backlog up 8.4% year-over-year [2] - Freight sales increased 8.4% to $2.09 billion, with equipment sales surging 32% due to stronger locomotive deliveries [2] - Transit segment revenue grew 8.2% to $793 million [2] Future Outlook - Wabtec raised its 2025 adjusted earnings guidance to a range of $8.85–$9.05 per share, an increase of $0.10 at the midpoint [3] - The company maintained its revenue outlook of $10.925–$11.225 billion, implying approximately 6.6% growth at the midpoint [3]

Financial Data and Key Metrics Changes - Sales in the third quarter were $2.9 billion, an increase of 8% compared to the prior year [4] - Adjusted EPS rose by 16%, driven by increased sales and margin expansion [5] - Total cash flow from operations for the quarter was $367 million [5] - The twelve-month backlog was $8.3 billion, representing an increase of 8.4% [5] - GAAP operating income was $491 million, with an adjusted operating margin of 21%, up 1.3 percentage points from the prior year [16][23] Business Line Data and Key Metrics Changes - Equipment sales increased by 32% year-over-year, driven by higher new locomotive deliveries [19] - Services revenue decreased by 11.6% due to planned lower modernization deliveries [18] - Digital Intelligence sales grew by 45.6%, primarily due to the Inspection Technologies acquisition [20] - Transit segment sales were up 8.2%, with adjusted operating income as a percentage of revenue increasing to 15.5% [26] Market Data and Key Metrics Changes - North America traffic was up 1.4%, but active locomotive fleets were slightly down compared to last year [6] - Railcar builds in North America were revised down to approximately 28,000 cars, a 34% reduction from the previous year [7] - Internationally, strong activity was noted in markets such as Asia, India, Brazil, and CIS, with significant investments in infrastructure [7] Company Strategy and Development Direction - The company is focused on enhancing competitiveness and driving innovation through integration initiatives and cost efficiencies [12] - The strategy includes portfolio optimization and accretive bolt-on acquisitions to strengthen the business [13] - The company aims for leadership positions in segments with clear differentiation for long-term success [13] Management's Comments on Operating Environment and Future Outlook - Management expressed caution in navigating a volatile economic landscape while remaining optimistic about the strong pipeline of opportunities [6][31] - The company raised its full-year adjusted EPS guidance to between $8.85 to $9.05, reflecting confidence in future growth [32] - Management highlighted the importance of product innovation and disciplined cost management in driving ongoing success [31] Other Important Information - The company secured a historic $4.2 billion order with Kazakhstan's National Railway, the largest single rail order in history [8] - The integration of Inspection Technologies is progressing positively, with expectations for cross-selling opportunities [94] Q&A Session Summary Question: Concerns about organic growth being in low single digits - Management noted that the twelve-month backlog growth has outpaced last year, indicating a stronger coverage for future growth [37] Question: Expectations for services growth in 2026 - Core services are expected to grow in the 5% to 7% range, driven by fleet age and innovation [41] Question: Thoughts on backlog and upcoming acquisitions - Management indicated stronger coverage for 2026 and expects acquisitions to be accretive to margins and EPS [48] Question: Impact of tariffs on cash flow and P&L - Tariffs are impacting cash flow, with a lag in their effect on the P&L expected to be two to four quarters [57] Question: Update on regulatory environment and advanced technologies - Management sees positive momentum in regulatory support for advanced technologies, which will contribute to digital business growth [92] Question: Details on the Kazakhstan contract - The contract includes 300 locomotives over ten years, along with service agreements for existing locomotives [87]

Financial Data and Key Metrics Changes - Sales in Q3 2025 were $2.9 billion, an increase of 8% compared to the previous year, driven by growth in both freight and transit segments [3][10] - Adjusted EPS rose by 16%, attributed to increased sales and margin expansion [3][11] - Total cash flow from operations for the quarter was $367 million, reflecting a decrease year-over-year due to higher tariffs and increased working capital [20][21] - The 12-month backlog reached $8.3 billion, up 8.4%, while the multi-year backlog hit an all-time high [3][10] Business Line Data and Key Metrics Changes - Equipment sales increased by 32% year-over-year, driven by higher new locomotive deliveries [12][14] - Digital intelligence sales surged by 45.6%, primarily due to the acquisition of Inspection Technologies [14] - Services revenue declined by 11.6% from the previous year, expected to continue decreasing in Q4 due to lower modernization deliveries [12][14] Market Data and Key Metrics Changes - North American traffic rose by 1.4%, although Wabtec's active locomotive fleets were slightly down compared to last year [4][5] - The North American railcar build forecast was reduced to approximately 28,000 cars, a 34% decrease from the previous year [5] - Internationally, strong activity was noted in markets such as Asia, India, Brazil, and CIS, with significant investments in infrastructure [5][6] Company Strategy and Development Direction - The company is focused on enhancing competitiveness and driving innovation through integration initiatives and portfolio optimization [9][10] - Wabtec aims to maintain leadership positions in segments with clear differentiation, targeting long-term success [9] - The strategy includes disciplined capital allocation to maximize shareholder returns while pursuing bolt-on acquisitions [21] Management's Comments on Operating Environment and Future Outlook - Management expressed caution in navigating a volatile economic landscape while remaining optimistic about the underlying business momentum [4][22] - The company raised its full-year adjusted EPS guidance to between $8.85 and $9.05, reflecting confidence in continued profitable growth [22][23] - Management highlighted a strong pipeline of opportunities and a commitment to product innovation and cost management [22][23] Other Important Information - The company secured a historic $4.2 billion order with Kazakhstan's National Railway, marking the largest single rail order in history [6][7] - The integration of Inspection Technologies is progressing positively, with expectations for cross-selling opportunities [66] Q&A Session Summary Question: Concerns about organic growth being in low single digits - Management noted that the 12-month backlog growth has outpaced last year, indicating stronger coverage for 2026 and a positive pipeline of opportunities, particularly in international markets [28][30] Question: Insights on services and modernization expectations - Management expects core services to grow in the 5% to 7% range, with variations tied to capital expenditure allocations between new locomotives and modernization [31] Question: Backlog and upcoming acquisitions - Management confirmed that the backlog is stronger for 2026 than the previous year, with acquisitions expected to provide inorganic growth [34][36] Question: Impact of tariffs on cash flow and P&L - Management explained that tariffs impact cash flow first, with a lag before affecting the P&L, and outlined a four-pronged approach to mitigate tariff impacts [41][43] Question: Digital product penetration and international growth - Management indicated that there are opportunities for digital product penetration in international markets, particularly in Kazakhstan and CIS countries [83]

Financial Performance - Wabtec's Q3 2025 sales reached $2.89 billion, an increase of 8.4% year-over-year[7] - GAAP earnings per share (EPS) increased by 11.0% year-over-year to $1.81, while adjusted EPS increased by 16.0% year-over-year to $2.32[7] - Operating margin was 17.0% on a GAAP basis and 21.0% on an adjusted basis, benefiting from sales growth and improved gross margin[7] - Cash flow from operations was $367 million, impacted by increased tariffs and higher working capital[7] - The company's 12-month backlog increased by 8.4% to $8.27 billion, providing strong visibility for 2025 and beyond[7] Segment Performance - Freight segment sales were $2.093 billion, up 8.4% year-over-year[35] - Transit segment sales were $793 million, up 8.2% year-over-year (5.2% on a constant currency basis)[35] - Freight segment operating margin was 19.8% on a GAAP basis and 24.5% on an adjusted basis[45] - Transit segment operating margin was 14.5% on a GAAP basis and 15.5% on an adjusted basis[48] Financial Outlook - Wabtec updated its 2025 financial guidance, projecting revenues between $10.925 billion and $11.225 billion and adjusted diluted EPS between $8.55 and $9.15[57] - The company expects a cash conversion rate of over 90%[57]

Core Insights - Consistent earnings growth is crucial for companies as it directly impacts profitability and share prices [1][2] - Market expectations of earnings significantly influence stock price movements, often leading to declines even when earnings grow [2][3] Earnings Estimates & Stock Selection - Earnings estimates reflect analysts' views on sales growth, product demand, competitive environment, profit margins, and cost control, serving as a key tool for investment decisions [3] - Investors should focus on stocks with historical earnings growth and increasing quarterly and annual earnings estimates [4][8] Screening Criteria - The screening process identified stocks with strong earnings growth and positive estimate revisions, narrowing down from 7,839 stocks to 16 [5][8] - Key screening measures include Zacks Rank, historical EPS growth, and recent changes in earnings estimates [5][6][7] Highlighted Stocks - **JPMorgan Chase & Co. (JPM)**: Expected earnings growth rate of 7.9% over the next five years, currently holds a Zacks Rank 2 (Buy) [7][8] - **Commvault Systems, Inc. (CVLT)**: Anticipated earnings growth rate of 13.4% for the current year, currently holds a Zacks Rank 1 (Strong Buy) [9][8] - **Westinghouse Air Brake Technologies Corporation (WAB)**: Projected earnings growth rate of 24.5% over the next five years, currently holds a Zacks Rank 2 (Buy) [10][8]

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Railway Sector in China - **Key Development**: China's railway sector is entering a multi-year upcycle with significant orders for high-speed trains and maintenance services, indicating a strategic shift from air to rail travel for passengers and from trucking to rail for freight [2][3] Core Insights and Arguments - **Procurement Orders**: China announced the procurement of 210 CRH350 high-speed trainsets and maintenance orders for 183 trainsets at level 5, confirming the ongoing multi-year upcycle in high-speed train demand [2][3] - **Market Dynamics**: The aging fleet of multiple units (MUs) and subways is leading to increased maintenance demand, with aftermarket services becoming a key growth driver for companies like CRRC Corp and Zhuzhou CRRC Times Electric Co (ZZCRRC) [2][3][7] - **Performance Discrepancy**: CRRC and ZZCRRC faced underperformance in the first half of 2025, with H shares declining by approximately 5% and A shares by about 15%, while the broader market indices showed gains [3] - **Bidding Activity**: Recent intense bidding activity by the China Railway Corporation (CRC) for new locomotives and MUs marks a significant turning point for the sector, driven by the new energy transition and infrastructure expansion [3][4] Strategic Initiatives - **Energy Transition**: The shift towards energy-efficient locomotives is being driven by the replacement of older diesel models, aligning with China's national energy transition goals [3][7] - **Infrastructure Expansion**: The approval of the Xinjiang-Tibet Railway project underscores China's commitment to enhancing its railway infrastructure, which is expected to facilitate economic growth and development [3][7] Financial Metrics and Projections - **Maintenance Orders**: The release of level 5 maintenance orders for 183 trainsets, in addition to previous orders, highlights the growing significance of aftermarket maintenance as a revenue stream [7] - **Gross Profit Margin**: The gross profit margin for maintenance services has improved to approximately 20% from 10% a decade ago, indicating better profitability in this segment [7] - **Future Demand**: The demand for MUs is expected to grow significantly, with high-speed rail expansion projected to reach 70,000 km by 2035, and the replacement cycle for older trains beginning in 2027 [3][7] Companies Discussed - **CRRC Corp**: A shares (601766.SS) and H shares (1766.HK) are rated as Overweight (OW) with price targets of Rmb 7.3 and HK$ 5.7 respectively [14] - **Zhuzhou CRRC Times Electric Co**: A shares (688187.SS) and H shares (3898.HK) are also rated as Overweight (OW) with price targets of Rmb 45.94 and HK$ 36.80 respectively [14] Additional Insights - **Aftermarket Services**: The focus on aftermarket opportunities is becoming increasingly important, with rising sales contributions in the RTV (subway train) segment [7] - **Government Programs**: The 'Large-Scale Equipment Renewal & Replacement' program by CRC aims to replace 7,000-8,000 older locomotives by 2027, ensuring a stable market for rail equipment manufacturers [7] This summary encapsulates the key points discussed in the conference call, highlighting the positive outlook for the railway sector in China and the strategic positioning of CRRC and ZZCRRC to capitalize on upcoming opportunities.