Gold prices hold sharp gains as soft US jobs data fuels Fed rate cut bets
Introduction & Market Context
Westinghouse Air Brake Technologies Corporation (NYSE:WAB), known as Wabtec, presented its first quarter 2025 financial results on April 23, showing solid performance across key metrics despite mixed market conditions. The company demonstrated resilience in the face of unfavorable North American railcar deliveries, leveraging its international growth strategy to drive revenue and margin expansion.
The results come after a disappointing fourth quarter 2024, when Wabtec missed earnings expectations with an adjusted EPS of $1.68 versus the forecasted $1.74. The company’s stock, which fell 10.04% following that earnings miss, has since shown signs of recovery, with fundamentals data showing a 2.81% increase as of the most recent close.
As shown in the following overview of market expectations, Wabtec is operating in a mixed environment with favorable North American traffic and international freight volumes, but facing headwinds in North American railcar deliveries:
Quarterly Performance Highlights
Wabtec reported first quarter 2025 sales of $2.61 billion, representing a 4.5% increase year-over-year (6.2% excluding currency effects). The company achieved significant margin expansion, with GAAP operating margin improving from 16.5% to 18.2% and adjusted operating margin rising from 19.8% to 21.7%.
This operational improvement translated into substantial earnings growth, with GAAP earnings per share increasing 22.9% to $1.88 and adjusted EPS rising 20.6% to $2.28. The company generated $191 million in cash flow from operations and maintained a solid 12-month backlog of $8.20 billion.
The following chart illustrates the company’s key financial metrics for Q1 2025:
A more detailed breakdown of the financial performance shows the consistent improvement across sales, operating income, and earnings per share:
Segment Analysis
Wabtec’s performance was driven by growth in both its Freight and Transit segments, with particularly strong results in services revenue.
The Freight segment, which accounts for approximately 73% of total revenue, generated $1.90 billion in sales, a 4.2% increase year-over-year (5.6% excluding currency). Operating margin in this segment expanded significantly, with GAAP operating margin improving from 20.2% to 22.1% and adjusted operating margin rising from 24.1% to 25.7%. The segment’s 12-month backlog increased 7.1% to $6.07 billion.
As shown in the following chart detailing the Freight segment’s performance:
The Transit segment also demonstrated strong growth, with sales increasing 5.3% to $709 million (7.9% excluding currency). Operating margin in this segment showed substantial improvement, with GAAP operating margin rising from 11.0% to 12.7% and adjusted operating margin increasing from 12.7% to 14.6%. The segment’s 12-month backlog grew 4.1% to $2.13 billion.
The Transit segment’s performance is illustrated in the following chart:
A breakdown of sales by product line reveals divergent performance, with Services showing robust growth of 16.9% while Equipment declined by 9.5%. Components saw a slight decrease of 0.8%, while Digital Intelligence grew by 2.8%.
International Growth Strategy
A key driver of Wabtec’s performance has been its successful international expansion. The company highlighted significant international revenue growth, with an 8.5% CAGR from 2022 to 2024. The international installed base has shown resilient growth with a 4.6% CAGR from 2017 to 2024.
The presentation emphasized that international business carries a higher profit margin than North American operations, making this growth particularly valuable for overall margin expansion. Recent international wins include a $300 million service agreement in Kazakhstan, $130 million in new locomotive, mining, and service orders in the APAC region, and transit contracts in Europe.
The following chart details Wabtec’s international revenue growth and regional breakdown:
Updated 2025 Guidance and 5-Year Outlook
Based on the strong first quarter performance, Wabtec has updated its financial guidance for 2025. While the revenue range remains unchanged at $10.725 billion to $11.025 billion, the company has raised its adjusted diluted EPS guidance from a range of $8.35-$8.75 to $8.35-$8.95, reflecting increased confidence in its ability to drive margin expansion and earnings growth.
The updated guidance is shown in the following chart:
Looking beyond 2025, Wabtec presented an optimistic five-year outlook, projecting mid-single-digit organic sales CAGR, over 350 basis points of adjusted operating margin expansion, double-digit adjusted EPS CAGR, and greater than 90% cash from operations conversion through 2029.
The company’s key takeaways and long-term outlook are summarized in the following slide:
Market Reaction and Analyst Perspectives
The market has responded positively to Wabtec’s Q1 2025 results, with the stock showing signs of recovery after the significant drop following the Q4 2024 earnings miss. According to the fundamentals data provided, the stock was up 2.81% in the most recent session, with premarket trading showing a 3.23% increase.
This performance aligns with CEO Rafael Santana’s comments from the previous earnings call, where he stated, "We expect to grow our business faster than the industry and to deliver mid single digit organic top line growth." The Q1 results appear to validate this outlook, with the company demonstrating its ability to drive both top-line growth and margin expansion.
CFO John Olin (NYSE:OLN)’s previous statement that "We see more opportunity today than we did three years ago in terms of our ability to grow margins" is also supported by the significant margin improvement shown in the Q1 results.
The company’s focus on international growth, service revenue expansion, and operational efficiency appears to be yielding results, positioning Wabtec for continued growth despite mixed market conditions in North America. The raised EPS guidance for 2025 suggests management’s increasing confidence in the company’s ability to execute its strategy and deliver value to shareholders.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.