Wabtec Q1 Earnings Call Highlights

Key Points

• Wabtec reported Q1 sales of about $3.0 billion (+13% YoY) and adjusted EPS of $2.71 (+18.9%), and raised its 2026 adjusted EPS guidance to $10.25–$10.65, with management saying roughly half the improvement at the midpoint came from operational gains and half from non-operational tailwinds like currency and tax timing.
• The company’s backlog expanded meaningfully—12‑month backlog was up 13% and multi‑year backlog exceeded $30 billion (+38%)—with the Dellner acquisition contributing several percentage points of that growth, particularly in the Transit business.
• Wabtec finished the quarter with liquidity of $2.09 billion and net leverage of 2.3x (within target), returned capital via $242 million in buybacks and $53 million of dividends, and saw margin and revenue gains in both Freight and Transit, though tariffs and inflationary input costs are expected to pressure margins in H1.

Wabtec NYSE: WAB reported first-quarter 2026 results that management said came in ahead of internal expectations operationally, while earnings also benefited from non-operational tailwinds tied to currency and tax timing. President and CEO Rafael Santana told investors the company remains focused on “advancing mission-critical transportation and industrial technologies” and building a “more efficient, high-performing global platform” to drive long-term value.

First-quarter results show revenue growth and higher adjusted EPS

For the quarter, Wabtec posted sales of about $3.0 billion, up 13% year over year, with adjusted earnings per diluted share of $2.71, up 18.9%, according to CFO John Olin. Total cash flow from operations was $199 million.

Olin said the quarter included the impact of an exit from a low-margin digital project, “fully reflected in the quarter,” and that non-operational items were more favorable than expected. He attributed the year-over-year improvement in other income primarily to “the impact of currency fluctuations on our international assets and liabilities,” and said tax timing helped the quarter as well. Wabtec’s adjusted effective tax rate was 22.2% in Q1, while management maintained its full-year expectation of approximately 24.5%.

GAAP earnings per diluted share were $2.12, up 12.8% from the year-ago quarter. Olin said net pre-tax charges totaled $41 million, reflecting purchase accounting adjustments and transaction costs related to recent acquisitions, along with restructuring costs tied to “integration and portfolio optimization initiatives.”

On profitability, Olin reported adjusted operating margin of 21.9%, up 0.2 percentage points year over year, achieved despite “tough comps,” tariff-related headwinds, and the digital portfolio exit. GAAP operating margin was 17.5%, down 0.7 percentage points, which Olin said was affected by non-cash purchase accounting adjustments tied to acquisitions.

Backlog expands, aided in part by Dellner acquisition

Management emphasized backlog as a key strength. Santana said 12-month backlog increased 13% from the prior year, while multi-year backlog exceeded $30 billion, up 38%.

In Q&A, Olin provided additional detail on how acquisitions contributed to the backlog growth, particularly Dellner. He said Dellner accounted for about three percentage points of enterprise-wide 12-month backlog growth and about 3.5 percentage points of enterprise-wide multi-year backlog growth. Within the Transit segment, Olin said 12-month backlog growth of 20.7% included about 12 percentage points from Dellner, while multi-year backlog growth of roughly 26% included about 15.5% from Dellner.

Olin cautioned against viewing backlog as a precise near-term revenue predictor, noting volatility in both 12-month and multi-year figures. However, he said that over time, 12-month backlog growth has tended to align with revenue growth when averaged across longer periods.

Segment performance: Freight growth and Transit margin expansion

Freight segment sales rose 11.3%, with adjusted operating income of $550 million, up 12.7%, and adjusted operating margin of 26.0%, up 0.3 percentage points, Olin said. He attributed the margin improvement to higher gross margin and cited the mix benefit from acquisitions including Inspection Technologies and Frauscher. Freight 12-month backlog was $6.68 billion, up 10.1%, and multi-year backlog was $25.18 billion, up 41.0%.

Transit segment sales increased 17.8% to $835 million; excluding foreign exchange, sales were up 11.0%. Olin said Dellner contributed a partial quarter of revenue, representing about 5.8 percentage points of the segment’s sales growth. Adjusted segment operating income was $138 million, and adjusted operating margin was 16.6%, up 2.0 percentage points year over year.

Market conditions: mixed North America, strong international activity

Discussing end markets, Santana said key freight metrics remain “mixed,” but pointed to resilience in the business and “solid momentum” internationally. In North America, he said carload traffic was up 2% in the quarter, while the industry’s active locomotive fleet was down slightly; Wabtec’s active fleet “trended up” compared with the prior-year quarter.

Internationally, Santana said carloads continue to grow “at a robust pace” across markets including Kazakhstan, Latin America, Africa, and India, supported by infrastructure investments that are feeding the orders pipeline.

On the North American railcar build, Santana said demand for new railcars is projected to be approximately 24,000 cars for 2026, down 22% from 2025, and that the industry forecast was unchanged from the prior quarter.

In transit, Santana said indicators remain positive, with ridership increasing in markets such as Europe and India and “strong backlogs at car builders,” supported by public investment in fleet expansions and renewals.

Business wins, acquisition integration, and updated guidance

During the quarter, management highlighted several orders and milestones. Santana cited:

• A “multi-billion dollar, multi-year” mining order for drive systems and aftermarket parts
• A $210 million multi-year modernization award with MBTA
• A $54 million brake and couplers order with Kawasaki for New York City Transit, which Santana said validated the impact of the Downer acquisition
• Progress on the first “EVO modernization build,” which Santana described as a milestone as Wabtec transitions from development to commercialization

On capital allocation and financial position, Olin said liquidity ended the quarter at $2.09 billion and net debt leverage was 2.3x, within the company’s targeted range of 2.0–2.5x, even after funding the Dellner acquisition for about $1 billion. Wabtec repurchased $242 million of shares and paid $53 million in dividends during the quarter.

Turning to guidance, Santana said Wabtec raised its adjusted EPS midpoint while keeping revenue guidance unchanged. The company now expects adjusted EPS of $10.25 to $10.65 for 2026, which Santana said represents about 17% growth at the midpoint.

In response to questions, Olin said the $0.20 increase at the midpoint reflected roughly $0.10 of operational improvement and $0.10 of non-operational benefits. On the operational side, he pointed to better execution and a reassessment of what was “structural versus timing,” offset by higher costs, including inflation in metals (copper, aluminum, steel), precious metals, transportation, and memory chips in the digital business. On the non-operational side, Olin said Wabtec assumes net other income—up $23 million on an adjusted basis in Q1—will “largely…stick,” while tax favorability in the quarter would become “a little bit of a headwind” through the remainder of the year as the company returns to its full-year tax rate expectation.

Tariffs were another focal point. Santana said tariffs announced to date are included in guidance and that the company is not seeing an impact on revenues. Olin added that changes to the Section 232 tariff regime were “largely indifferent” financially for Wabtec and “much easier to administer” from an administrative standpoint, while reiterating management’s expectation that tariffs pressure margins in the first half before dissipating in the second half as the company laps prior-year impacts.

Looking further ahead, Santana said Wabtec’s pipeline remains strong across geographies and business lines, with visibility strengthened across 12 to 36 months. While declining modernization volumes in North America were noted as a near-term pressure point, Santana highlighted technology initiatives including the EVO Advantage program, automation and digital initiatives such as “zero to zero,” and progress in hybrid battery-electric programs as areas expected to support longer-term growth.

About Wabtec NYSE: WAB

Wabtec Corporation (Westinghouse Air Brake Technologies Corporation) is a global provider of equipment, systems and services for the rail industry. The company supplies products and solutions to freight railroads, transit agencies and other industrial operators, focusing on technologies that improve the performance, safety and efficiency of locomotives and rail networks. Wabtec's business spans new equipment manufacturing, aftermarket parts and services, and digital and control systems for rail operations.

Product and service offerings include locomotive systems and components, braking and air systems, propulsion and traction equipment, signaling and control technologies, and a range of aftermarket services such as maintenance, remanufacturing, parts distribution and fleet modernization.

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