Wabtec Corporation Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
Wabtec Corporation (NYSE:WAB) defied analyst predictions to release its third-quarter results, which were ahead of market expectations. Results were good overall, with revenues beating analyst predictions by 3.7% to hit US$1.9b. Statutory earnings per share (EPS) came in at US$0.67, some 5.7% above whatthe analysts had expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Wabtec after the latest results.
See our latest analysis for Wabtec
Taking into account the latest results, Wabtec’s twelve analysts currently expect revenues in 2021 to be US$7.94b, approximately in line with the last 12 months. Per-share earnings are expected to jump 70% to US$3.78. In the lead-up to this report, the analysts had been modelling revenues of US$7.92b and earnings per share (EPS) of US$3.55 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target was unchanged at US$73.83, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Wabtec, with the most bullish analyst valuing it at US$91.00 and the most bearish at US$57.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Wabtec shareholders.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It’s pretty clear that there is an expectation that Wabtec’s revenue growth will slow down substantially, with revenues next year expected to grow 0.5%, compared to a historical growth rate of 24% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.4% next year. So it’s pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Wabtec.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Wabtec’s earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Wabtec’s revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year’s earnings. We have estimates – from multiple Wabtec analysts – going out to 2023, and you can see them free on our platform here.
And what about risks? Every company has them, and we’ve spotted 1 warning sign for Wabtec you should know about.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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