Westinghouse Air Brake Technologies (WAB) Stephens 26th Annual Investment Conference | NASH2024 summary

Business model and growth drivers

• Focus on delivering efficiency, productivity, and reliability to customers, ensuring strong returns on investment even during industry downturns.

• Backlog-driven business model provides visibility and stability, with a multi-year backlog of $22 billion and a 12-month backlog up 7.5% year-over-year.

• Cost reduction and integration efforts, including Lean implementation and Integration 2.0, have driven significant margin expansion and operational improvements.

• Portfolio optimization and pricing for value strategies are expected to further enhance margins and focus.

• International growth is fueled by expanding installed base, new market entries (e.g., Africa, Egypt), and strong demand in regions like Brazil, Australia, India, and the CIS.

Market trends and outlook

• North American market remains stable through modernization programs, with continued opportunities in both FDL and EVO engine upgrades.

• International markets are experiencing growth in carloads and market share, with notable projects in mining and infrastructure.

• Digital intelligence is a key growth area, with a portfolio spanning onboard electronics, Positive Train Control, and network optimization, especially strong internationally.

• Recurring revenue is 46% company-wide, with digital business moving toward more SaaS and recurring models.

• Regulatory uncertainty around CARB/EPA rules persists, but long-term strategy is based on economic returns rather than regulatory mandates.

Innovation and technology

• Modernization offerings, such as FDL Advantage and EVO Advantage, deliver significant fuel savings (up to 7%) and strong customer ROI.

• Battery electric and hydrogen fuel cell locomotives are being commercialized, with battery electric already deployed in mining and hydrogen seen as a longer-term solution.

• Near-zero emissions strategy leverages renewable fuels, biofuels, and liquid hydrogen, aiming for over 80% carbon reduction while maintaining asset flexibility.

• Digital products like Trip Optimizer and Zero-to-Zero drive fuel efficiency and operational optimization, with international markets adopting these technologies.

• Investment in next-generation dispatch and network optimization systems supports long-term digital growth.