Wabtec (WAB) has always been unusually acquisitive, but in merging with/acquiring General Electric’s (GE)
Transportation business, Wabtec is bagging the biggest target available
to the company. While big M&A carries big risk, Wabtec knows how to
integrate deals and GE is an uncommonly opportunity-rich deal for
Wabtec, as it brings the global leader in locomotives and a very strong
player in services and digital/electronics to one of the leaders in
components and equipment for trains. In addition to rich revenue
cross-selling opportunities and expense synergies, I believe Wabtec is
doing this deal at an attractive point in the cycle.
Modeling
Wabtec’s post-deal financials requires more than a little guesswork,
but I believe there is a solid chance that this company will be an
enterprise with $10 billion in revenue and low-to-mid teen FCF margins
in 2022, with mid single-digit revenue growth beyond that point. If
those estimates are the right ballpark, Wabtec shares look undervalued
below the triple digits.
Read more here:
Wabtec Biggest-Ever Deal Should Be Transformative
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