Wabtec Corporation WAB reported mixed third-quarter 2026 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Both metrics increased year over year, supported by growth across Freight and Transit businesses and improved profitability.
Quarterly earnings (excluding 41 cents from non-recurring items) of $2.83 per share beat the Zacks Consensus Estimate of $2.72 by 4.04% and increased 22% year over year. Revenues climbed 8.1% year over year to $3.12 billion but missed the consensus mark of $3.18 billion by 2%. The 12-month backlog increased 8.8% to $8.99 billion.
Wabtec's Freight Business Delivers Solid Growth
Freight segment revenues increased 6.9% year over year to $2.24 billion. Services revenues rose 6.7% to $794 million, driven by stronger core demand and increased modernization deliveries. Equipment sales edged up 0.3% to $679 million as higher mining sales were largely offset by lower locomotive deliveries.
Digital Intelligence revenues surged 24.2% to $369 million, aided by the Frauscher Sensor Technologies acquisition and robust core digital demand. Components revenues increased 5.3% to $395 million, supported by industrial, maintenance-of-way and international demand. Freight adjusted operating margin expanded 190 basis points to 26.4%, reflecting improved gross margins and operating efficiency.
Wabtec Price, Consensus and EPS Surprise
Wabtec price-consensus-eps-surprise-chart | Wabtec Quote
WAB's Transit Segment Posts Strong Margin Gains
Transit segment revenues advanced 11.3% year over year to $883 million. Growth reflected the Dellner Couplers acquisition and higher original equipment and aftermarket sales, partially offset by unfavorable currency movements. On a constant-currency basis, revenues increased 12.5%.
Original equipment revenues rose to $408 million from $367 million, while aftermarket revenues increased to $475 million from $426 million. Transit adjusted operating margin expanded 260 basis points to 18.1%, primarily benefiting from improved gross profitability despite higher operating expenses relative to sales.
Wabtec Benefits From Organic and Acquisition Gains
Acquisitions contributed $114 million to third-quarter revenue growth, comprising $49 million from Freight and $65 million from Transit. Organic growth added $137 million, including $102 million from Freight and $35 million from Transit.
Portfolio optimization activities reduced revenues by $12 million, while unfavorable foreign exchange movements lowered sales by $5 million. Organic growth exceeded acquisition contributions, highlighting the role of underlying customer demand alongside strategic investments in expanding Wabtec's business.
WAB Expands Consolidated Operating Profitability
Adjusted gross margin improved 180 basis points year over year to 37.4%, while adjusted operating margin expanded 190 basis points to 22.9%. Adjusted operating income increased to $715 million from $607 million, supported by higher sales, favorable product mix and productivity improvements.
GAAP operating income climbed to $625 million from $491 million, with operating margin expanding 300 basis points to 20%. Benefits from cost recovery, manufacturing efficiencies and Integration 3.0 savings helped offset higher raw material costs, tariffs and acquisition-related expenses. Selling, general and administrative expenses increased to $383 million from $375 million.
Wabtec's Backlog Strengthens Revenue Visibility
Total backlog reached $31.44 billion as of Sept. 30, 2026, up 22.9% from $25.58 billion a year earlier. Freight backlog increased to $25.77 billion, while Transit backlog reached $5.67 billion, reflecting continued order momentum across both businesses.
The 12-month backlog grew $725 million year over year. Freight accounted for $6.54 billion of near-term orders, while Transit represented $2.45 billion. Recent orders included $1 billion in international locomotive and service contracts and $633 million in North American locomotive and modernization orders.
WAB Generates Higher Operating Cash Flow
Cash from operations increased to $455 million from $367 million in the prior-year quarter, primarily driven by higher net income. Operating cash flow conversion stood at 82% compared with 83% a year earlier.
Wabtec ended the quarter with $489 million in cash, cash equivalents and restricted cash. Total available liquidity was $2.09 billion, including $1.61 billion available under existing credit facilities. Total debt stood at $6.38 billion. During the quarter, Wabtec repurchased $305 million of shares and paid $52 million in dividends.
WAB Raises 2026 Earnings Outlook
Wabtec raised and tightened its full-year 2026 adjusted earnings guidance to $10.85-$11.05 per share from the previous $10.60-$10.90 range. The midpoint increased 20 cents and represents expected year-over-year growth of approximately 22%. The Zacks Consensus Estimate for 2026 earnings is currently pegged at $10.89 per share, below the midpoint of the guided range.
The company maintained its 2026 revenue guidance at $12.30-$12.60 billion, implying growth of approximately 11.5% at the midpoint. The outlook assumes continued operating margin expansion, productivity improvements and benefits from Integration 3.0 and portfolio optimization initiatives. The Zacks Consensus Estimate for 2026 revenues is currently pegged at $12.53 billion.
Currently, Wabtec carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Q3 Performance of Another Transportation Company
Delta Air Lines DAL reported third-quarter 2026 earnings (excluding 57 cents from non-recurring items) of $1.72 per share, missing the Zacks Consensus Estimate of $1.80 by 4.44%. Earnings increased year over year despite sharply higher fuel costs and rising non-fuel expenses.
Adjusted revenues climbed 16% year over year to $17.59 billion but missed the consensus estimate of $17.74 billion by 0.9%. Broad demand strength and healthy yields lifted adjusted total revenue per available seat mile, or TRASM, 15%, while premium and diversified revenue streams continued to expand.
Upcoming Earnings Release of a Transportation Company
Union Pacific UNP is scheduled to report third-quarter 2026 earnings on Oct. 22. The Zacks Consensus Estimate for third-quarter 2026 earnings has been revised 2.1% upward over the past 60 days.
UNP’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters (missing the mark on the other occasion). The average beat is 2.8%. Improvement in the freight scenario is expected to aid results.
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