Westinghouse Air Brake Technologies (WAB) Q4 2023 earnings summary

Executive summary

• Q4 sales rose 9.5% YoY to $2.526B; GAAP diluted EPS was $1.20, up 39.5%, and adjusted diluted EPS was $1.54, up 18.5%.

• FY23 sales increased 15.7% to $9.677B; adjusted EPS rose 21.8% to $5.92 and operating cash flow reached a record $1.201B.

• Year-end total backlog was $21.999B, down 2.0% YoY; 12-month backlog was $7.457B, up 10.3%.

Financial highlights

• Q4 GAAP and adjusted operating income were $308M and $431M; GAAP operating margin was 12.2% and adjusted margin was 17.0%.

• Q4 GAAP gross margin was 30.3%, up 2.0 pts YoY; adjusted gross margin was 30.8%, up 1.2 pts, aided by price/mix and productivity.

• Q4 net income attributable to shareholders was $215M versus $158M; higher sales and margin expansion were partly offset by increased interest expense.

• Q4 operating cash flow was $686M versus $410M YoY; comparison included a $70M unfavorable accounts-receivable securitization impact.

Outlook and guidance

• FY24 sales guidance is $10.05B–$10.35B and adjusted diluted EPS guidance is $6.50–$6.90, representing 13.2% growth at the midpoint.

• FY24 operating cash flow conversion is expected to exceed 90%.

• Guidance assumes higher adjusted operating margin, productivity and absorption, Integration 2.0 and portfolio optimization benefits, lower SG&A and Engineering costs as a share of sales, ~25% tax rate, and capex of ~2% of sales.

• Expected demand drivers include higher locomotive deliveries and mining sales, continued MOD demand, international digital growth, and increased transit infrastructure investment; lower NA railcar build and slower NA digital growth are offsets.