Wabtec In A Value-Growth Tug-Of-War

Wabtec (WAB), one of the leading suppliers of parts, components, and systems to the freight and transit train sectors, continues to see turbulent conditions both in its operating results and its share price performance. The stock has gone basically nowhere since I last wrote about the company, but there’s actually been some pretty wide swings between the peak and trough (roughly 35%) over the past year as investors seem to be struggling with a strong “want to like” instinct and some rather spotty financial results.

The shares still leave me a little uneasy. I think Wabtec is well-run and I believe the Faiveley deal will add value both through expense leverage and broadening the company’s horizons (in transit and in non-U.S. markets). But I also believe that freight spending could be weaker than bulls expect, and these shares often react poorly to disappointment. I do believe that mid-to-high single-digit growth can support a fair value in the $80’s, but investors considering these shares need to be aware of that ongoing tug-of-war between the bull and bear camps and the impact it can have on the share price in the short term, and especially around events like earnings reports.

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Wabtec In A Value-Growth Tug-Of-War