|Shares Out. (in M):||97||P/E||21||23|
|Market Cap (in $M):||8,000||P/FCF||0||0|
|Net Debt (in $M):||200||EBIT||0||0|
|Borrow Cost:||General Collateral|
Sign up for free guest access to view investment idea with a 45 days delay.
I like Rosco’s piece on Wabtec and it sounds attractive (and I like his style of thinking in general), but for Wabtec specifically, his long piece is a good illustration of why we’ve been short the company. So I figured I'd post the rebuttal. There is a ton of complacency here and a general perception that this heavily cyclical company is not cyclical. Management has tried to pitch this as a stable, secular grower, reality is it has been a stable grower for 6 years, a period which coincides with a massive boom in railroad spending which now sits at record peaks. In other words, it was just the upcycle. In the downcycle, EBIT could easily be cut in half, and we think the downcycle may be upon us.
I didn’t update this piece for the recent earnings, but you can take a quick look – was their first miss in a long time and they reduced guidance. I was somewhat surprised as I thought they’d be fine through this year as it takes quite a while to change railroad capex budgets, deliveries should still be great this year on old orders etc. This quarter was only a modest miss and guidedown, but I think it is just the start of what could be a lot of downside. Investors continue to value this stock very richly at the peak of the cycle.
Piece is uploaded below, but quite a few charts that didn’t seem to make it, can also view PDF here: