Wabtec (NYSE:WAB) runs a business model that has long relied on serial M&A and that is not going to change. What has changed, though, is that the company's key North American freight rail market has weakened considerably and is likely to stay in the doldrums for some time. That puts even more pressure on management to execute on the opportunities available in growing the transit business, growing its freight business outside North America, and continuing to execute on margins.
Not many businesses generate steady double-digit ROIC, and for all of the (valid) concerns about Wabtec's reliance on M&A, I think that detail should not be ignored. What's more, even amid a sharp downturn in its freight business, margins have remained quite solid. If management can execute on long-term opportunities in transit and freight, particularly overseas, there is enough potential business out there to support a higher fair value for the stock.
Weak Freight And Iffy Organic Growth Remain Issues For Wabtec