Sunday, June 3, 2018

Wabtec Biggest-Ever Deal Should Be Transformative

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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