Wabtec Q3 Earnings Call Highlights

Key Points

• Wabtec delivered strong third-quarter results: Sales rose 8.1% to $3.12 billion, adjusted EPS increased 22% to $2.83, and adjusted operating margin expanded to 22.9%.
• Backlog and orders continued to build, with the multi-year backlog surpassing $31 billion, up 22.9% year over year. The company secured $1 billion in international locomotive and service orders, plus more than $600 million in North American locomotive and modernization orders.
• Wabtec raised its full-year adjusted EPS outlook to $10.85–$11.05, while maintaining its revenue forecast. Management cited execution, productivity gains and favorable mix, although weaker North American railcar production remains a headwind.

Wabtec NYSE: WAB reported third-quarter 2026 sales growth of 8.1% and raised its full-year adjusted earnings outlook, citing stronger-than-expected margin performance, backlog growth and continued demand across freight and transit markets.

Sales totaled $3.12 billion in the quarter, up 8.1% from a year earlier, or 8.3% excluding currency effects. GAAP operating income rose 27.3% to $625 million, while adjusted operating margin increased 1.9 percentage points to 22.9%. Adjusted earnings per diluted share rose 22% to $2.83, and GAAP earnings per diluted share increased 33.7% to $2.42.

Chairman and CEO Rafael Santana said the results reflected “strength across the portfolio,” disciplined execution and strategic actions intended to improve the company’s growth profile and earnings power. Total cash flow from operations was $455 million during the quarter.

Backlog Expands as Orders Build

Wabtec’s 12-month backlog increased 8.8% from the prior year, while its multi-year backlog exceeded $31 billion, up 22.9%. Santana said the company’s order coverage is at its strongest level to date, particularly for long-lead-time products such as new locomotives.

During the quarter, Wabtec secured $1 billion in locomotive and service orders internationally, including awards in Africa and Brazil. In North America, the company converted more than $600 million of pipeline opportunities into locomotive and modernization orders from two Class I railroad customers. Its transit business also received $159 million in brake-equipment orders.

“These wins further expand our global installed base, strengthen our long-term customer partnerships, and create opportunities for attractive recurring revenues over time,” Santana said.

The Freight segment’s 12-month backlog was $6.54 billion, up 7.5% year over year, while its multi-year backlog rose 23.2% to $25.77 billion. Transit’s 12-month backlog reached $2.45 billion, up 12.2%, and its multi-year backlog increased 21.4%.

Margins Benefit From Execution and Mix

CFO John Olin said third-quarter margin expansion exceeded management’s expectations, supported by favorable product mix, productivity gains from its Integration 3.0 initiative, portfolio optimization efforts and lower operating expenses as a percentage of revenue.

GAAP gross margin rose 2.6 percentage points to 37.3%, while adjusted gross margin increased 1.8 percentage points. Olin said higher manufacturing costs, including net tariff effects, partly offset the operational benefits. The company recorded $5 million in net pretax restructuring charges, mainly tied to integration and portfolio optimization initiatives.

Freight sales rose 6.9%, with adjusted operating income climbing 15.2% to $591 million. The segment’s adjusted operating margin improved 1.9 percentage points to 26.4%. Transit sales increased 11.3% to $883 million, or 12.5% on a currency-adjusted basis, aided by the Dellner acquisition and growth in products and services. Transit adjusted operating margin increased 2.6 percentage points to 18.1%.

Across product lines, services revenue grew 6.7%, component sales increased 5.3%, and Digital Intelligence sales rose 24.2%, helped by the Frauscher Sensor Technologies acquisition and core digital demand. Equipment sales were slightly higher than a year ago, as increased mining sales were largely offset by lower locomotive deliveries that shifted into the fourth quarter.

Freight Markets Remain Mixed

Wabtec said North American rail carload traffic increased 3.5% in the quarter, contributing to a larger active locomotive fleet compared with the prior-year period. Santana said the company has seen more parts demand associated with locomotives returning to service and sustaining higher utilization levels.

However, North American railcar-build expectations have weakened. Industry sources now project roughly 23,000 railcars will be delivered in 2026, down from the approximately 25,000 forecast cited last quarter and representing a 26% decline from the prior year’s build level.

Olin noted that about 30% of Wabtec’s revenue is not represented in its backlog, including railcar-related business and certain parts sales. The decline in railcar production has pressured the original-equipment portion of the component business, though aftermarket, maintenance-of-way and industrial demand helped offset that impact.

International freight demand remained a source of opportunity, according to Santana, who cited activity in Central Asia, Africa and Asia. He also said transit conditions remained favorable in markets including Europe and India, where public investment and fleet renewal programs have supported customer backlogs.

Full-Year EPS Outlook Raised

Wabtec raised its full-year adjusted EPS guidance to a range of $10.85 to $11.05, representing 22% growth at the midpoint. The company left its revenue outlook unchanged.

Olin said certain locomotive deliveries shifted from the third quarter into the fourth quarter because of timing and customer-acceptance factors, rather than operational issues or changes in end-market demand. He said the units had already shipped and that the timing shift would not affect full-year revenue guidance.

The company ended the quarter with more than $2 billion of liquidity and a net debt leverage ratio of 2.1 times. During the quarter, Wabtec repurchased $305 million of shares and paid $52 million in dividends.

Looking ahead, Santana said Wabtec sees potential growth from fleet renewal, modernization, automation and technology upgrades, though he noted that broader North American fleet-renewal activity is not included in the company’s guidance. He also said the company expects Federal Railroad Administration approval for its Zero-to-Zero initiative, without providing a timetable.

About Wabtec (NYSE:WAB)

Westinghouse Air Brake Technologies Corporation, doing business as Wabtec NYSE: WAB, is a global provider of equipment, systems, digital solutions and services for the freight and passenger rail industries. The company develops technologies intended to improve the safety, efficiency, reliability and sustainability of rail transportation.

Wabtec's products and services include locomotives, locomotive components and modernization programs, braking systems, train control and signaling equipment, power and propulsion systems, and advanced digital solutions.

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