Westinghouse Air Brake Technologies(US:WAB)2025-10-22 13:32Financial Data and Key Metrics Changes - Sales in the third quarter were USD 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 [4] - Total cash flow from operations for the quarter was USD 367 million [4] - The 12-month backlog reached USD 8.3 billion, representing an increase of 8.4% [4] Business Line Data and Key Metrics Changes - Equipment sales increased by 32% year-over-year, driven by higher new locomotive deliveries [14] - Services revenue decreased by 11.6% due to planned lower modernization deliveries [14] - Digital intelligence sales surged by 45.6%, primarily due to the Inspection Technologies acquisition [15] - Transit segment sales grew by 8.2%, supported by products and services [20] Market Data and Key Metrics Changes - North American traffic was up 1.4% in the quarter, although Wabtec's active locomotive fleets were slightly down compared to last year [6] - The North American railcar build forecast was reduced to approximately 28,000 cars, a 34% decrease 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 [10] - Wabtec aims to maintain leadership positions in segments with clear differentiation, supported by ongoing portfolio optimization and strategic acquisitions [10] - The company is committed to product innovation and disciplined cost management to drive profitable growth [23] 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 [5] - The company raised its full-year adjusted EPS guidance to between USD 8.85 to USD 9.05, reflecting confidence in future growth [23] - Management highlighted the importance of fleet renewal and modernization as key drivers for customer investments [66] Other Important Information - The company secured a historic USD 4.2 billion order with Kazakhstan's National Railway, marking the largest single rail order in history [8] - The integration of Inspection Technologies is progressing positively, with early signs of cross-selling momentum [76] 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 future growth [29] Question: Expectations for services growth in 2026 - Management expects core services to grow in the 5% to 7% range, driven by fleet age and innovation [32] Question: Thoughts on backlog and upcoming acquisitions - Management indicated that the backlog is stronger for 2026 than the previous year, with acquisitions expected to provide inorganic growth [36] Question: Impact of tariffs on cash flow and inventory - Management discussed a four-pronged approach to mitigate tariff impacts, including seeking exemptions and optimizing supply chains [48] Question: Trends in gross margin and pricing - Management highlighted that contract escalations and the addition of Inspection Technologies positively impacted gross margins [54] Question: Insights on North American customer activity - Management emphasized the need for fleet renewal due to aging locomotives, which is essential for improving operational efficiency [66]