Year End #9: WAB, Old Faithful

WAB, Old Faithful

Wabtec, my seventh biggest and one of my middle-to-large positions, is boring. For instance, they were recommended in Oct 2012 as a MF SA pick and they have only 127 posts in those two years and 3 months… And 40 of those 127 posts were mine! However I bought into WAB a couple of months after the recommendation at $43.75 and it was over $91 a few weeks ago, and was still, even with all this weakness in the market, at $87.10 at Friday’s close. Just about 100% in two years.

So why am I in this boring company and what does it do? Well it makes air brakes and about everything else for trains (boring again), which includes metro transit as well. This means that they have a large replacement parts business which is high margin recurring revenue, as once you buy the original part, it’s too much trouble (and possibly dangerous) to change to another with different specs. Wabtec is a big dog in this market and constantly gets bigger by acquisitions, which it is very good at assimilating.

Okay, how has it done so far? Well… it’s the only stock on any US market that has been up every year of this century, right through minor recessions and the big one in 2008 and 2009. Every year!

So how did they do it? Well here’s what their revenues have looked like the past four years.

2011: 455 479 499 535 = 1.97 billion
2012: 583 610 588 610 = 2.39 billion
2013: 616 638 631 682 = 2.57 billion
2014: 695 731 797

Just keeps moving up. Nothing exciting. Very boring, in fact, but boring up.

My off-the-cuff estimate for the December quarter would be $830 million, up from $682 million, or up about 22%. That would give them yearly revenue of about $3.05 billion for 2014.

EPS over the same quarters have been:

2011: 43 47 48 48 = 1.86
2012: 61 68 65 67 = 2.61
2013: 72 77 76 79 = 3.04
2014: 83 91 93

And I’d guess 96 for the last quarter, giving them a total for the year of $3.63 and a PE of about 24. Same story, just keeps moving up.

Just for interest, here are their operating margins (in %).

2011: 14.6 11.8 15.1 14.6 = 14.0
2012: 16.1 16.5 16.5 16.5 = 16.4
2013: 16.8 17.4 17.5 16.3 = 17.0
2014: 17.5 18.1 17.1

Ditto. Just keeps moving up in spite of acquisitions.

And their last quarter:

Oct 2014 - reported record results for the Sept quarter, including the following:
Sales were a record $797 million, up 26%, with half the growth due to acquisitions.
Income from operations was a record $136 million, or 17.1% of sales.
Earnings were a record 93 cents, which was up 22%.
Backlog was a record $2.18 billion.

They had cash of $213 million and debt of $522 million.

Wabtec increased its 2014 guidance for earnings per share from $3.52 to $3.60, with revenues expected to be up about? 18% for the year. This guidance includes the acquisition of Dia-Frag and C2CE, which closed in the Sept quarter.

During the quarter, they repurchased 124,600 shares of stock for $10 million. Diluted shares are down by 170,000.

From Conference Call

Cash flow from operations was strong as we generated $93 million for the quarter.
Our backlog. increased during the quarter and now stands at a record $2.18 billion, which is about 21% higher than at the end of June !!! From these statistics, you, obviously, can see that the business is performing well.

Conclusion: All Good.


Boring is good!

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I hope you guys liked WAB. It’s such a steady stock.


I would love for my entire portfolio to have consisted of one stock for the past 10 years: WAB

It has crushed the S&P500 index and has boringly trudged upward year after year. And as a very astute investor on this board has pointed out:


It has grown to my largest position….in large measure due to your periodic summaries which have helped prevent me from ever selling a share.

I owe you a case of fine champagne.



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I hope you guys liked WAB. It’s such a steady stock.

Love WAB. Purchased small position a little over a year ago. Nice slow and steady climb to calm the nerves amidst the sea of all the ups and downs of everything more flashy, “exciting” and volatile. Will add to bring more of a calm reliable stalwart to steady and balance my portfolio life!


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For all that lovely history, the question today is … will it continue?


16 year Klein chart

WAB could be a bit ahead of itself after the 2013 run.

Denny Schlesinger

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Love, love, love WAB. Started a position a few weeks to months after the rec and it’s my 3rd largest position currently. It grew into that spot nicely. WHile the WAB board is boring, it’s the kind of stock one loves to hold and not worry about. Whenever anyone brings up a railroad stock, it crosses my mind “hmm, those rail cars will need some parts. Is my WAB position full or should I put more into it?” Glad to be in such good company.

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Glad to hear from fellow WAB fans!


From the Seeking Alpha News Feed:

Railroad demand strong despite crude oil developments • 8:19 AM
Clark Schultz, SA News Editor

A positive outlook on the railroad sector is issued by Cowen Research after a Q4 survey.

The investment firm notes that the drop in crude shipments in the sector is being offset by pent-up demand in other commodities and capacity pressure in other transportation modes.

Saul and ‘saulites’,

I will be purchasing more WAB for my mom’s account in the future. It is a stalwart that consistently marches upward. Saul highlights their record like this, it’s the only stock on any US market that has been up every year of this century, right through minor recessions and the big one in 2008 and 2009. Every year!

In the past few months, since Oct 2014, I have found the control of my emotions and the volatility of the markets, both with their positives and negatives, to work to my advantage. Simplistically, buy the dips and sell the overvaluations.

Those things said, WAB has been fairly stagnate in stub price since December after the huge Oct-Nov run. I am wondering about correlation, if any, whether perceived or actual, to the oil crash and bottom/resurgence? Not to be trading or timing the market, but good timing can certainly help. (Anyone make big adjustments back in early October 2014 that they want to divulge stellar results of?)

Any way, WAB reports 2/17 and I think they may receive some pent-up acceleration to their stock price for the capable manner in which they employ their deceleration competencies.

Sound-boarding and waiting for resonance,

Those things said, WAB has been fairly stagnate in stub price since December

Hi KL, As I look back, two Fridays ago they closed at $83.40 and closed today at $89.30 so they aren’t totally stagnant. Saul

True. A bit of a hyperbolical “stagnant.” More of a reasonable trading zone.

(And how did that spelling error make it through? OOPS!)

Thoughts about where they sit today and where you think they will be next week? I know, up, the only one for a decade. Maybe not next week, but next year ‘for sure’.

WAB, consistent like an English rail line,