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Key Points
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- Wabtec beat second-quarter expectations with sales up 17.5% to $3.18 billion and adjusted EPS up 21.6% to $2.76, prompting management to raise full-year 2026 guidance for both revenue and earnings.
- Backlog and major orders remain a key strength, with the multiyear backlog surpassing $30 billion and several large wins during the quarter, including a billion-dollar Australian order and contracts in Brazil, France and APAC mining.
- Margins improved across Freight and Transit despite tariff and mix pressures, as productivity, price increases and acquisitions helped drive operating margin expansion; management expects even stronger margin gains in the second half, especially in Q4.
Wabtec (NYSE:WAB) reported stronger-than-expected second-quarter 2026 results and raised its full-year outlook, citing broad revenue growth, margin expansion, a large multiyear backlog and continued demand across freight, transit, digital and international markets.
Chairman and CEO Rafael Santana said the company delivered a "strong H1 of the year" despite tariff headwinds, unfavorable business mix and difficult year-over-year comparisons. He said Wabtec's execution helped drive "robust growth, expanded margins, and delivered double-digit earnings per share growth."
For the second quarter, Wabtec reported sales of $3.18 billion, up 17.5% from the prior-year period. Adjusted earnings per diluted share rose 21.6% to $2.76, while GAAP earnings per diluted share increased 18.9% to $2.33. Cash flow from operations was $441 million for the quarter.
"Overall, the quarter reflects the strength of our execution, the resilience of our business, and solid momentum as we move through the year," EVP and CFO John Olin said.
Backlog and Orders Remain Central to Outlook
Santana highlighted backlog as a key strength. Wabtec's 12-month backlog increased 11% from the prior year, while its multiyear backlog exceeded $30 billion, up 42%. In the Freight segment, 12-month backlog was $6.64 billion, up 10.2%, and multiyear backlog reached $25.33 billion, up 47.8%. In Transit, 12-month backlog was $2.5 billion, up 14.5%, while multiyear backlog increased 19.4%.
The company also cited several major business wins during the quarter. Santana said Wabtec secured a billion-dollar order from an Australian customer spanning locomotives, services, components and digital solutions. The company also signed a $184 million Positive Train Control order with Vale in Brazil, received a $55 million platform door order for the Grand Paris Express project and secured a $52 million APAC mining order for drive systems for 240-ton mining trucks.
During the question-and-answer session, Santana said the Australian order had entered backlog and that Wabtec continues to see significant international opportunities in regions including those referenced by analysts such as Australia, East Asia, Uzbekistan, Mongolia, Pakistan, Brazil and parts of Africa. He said "more than a couple of significant deals" could materialize in the second half.
Freight and Transit Both Post Double-Digit Sales Growth
Freight segment sales rose 16.9% in the quarter. GAAP segment operating income was $504 million, producing an operating margin of 22.5%, up 0.9 percentage points from a year earlier. Adjusted operating income in Freight increased 20.6% to $579 million, and adjusted operating margin improved 0.8 percentage points to 25.8%.
Olin said the Freight improvement was driven by higher gross margin, contributions from acquisitions including Inspection Technologies and Frauscher, and continued productivity and efficiency efforts.
Transit segment sales increased 18.9% to $936 million, or 17.7% excluding foreign currency. GAAP operating income was $146 million. Adjusted segment operating income was $166 million, with adjusted operating margin rising 2.5 percentage points to 17.7%. Olin said underlying business momentum and the Dellner acquisition contributed to margin expansion.
Product line performance was mixed but broadly positive. Equipment sales rose 35% on higher locomotive deliveries and increased mining sales. Digital intelligence sales increased 88.5%, driven by the Inspection Technologies and Frauscher acquisitions. Transit sales benefited from Dellner and growth across products and services. Component sales declined 0.7%, reflecting lower North American railcar builds and portfolio optimization actions, partly offset by industrial product growth.
Margins Improve Despite Tariffs and Mix Pressure
Wabtec reported GAAP operating income of $600 million, up 27.1% from the prior year. GAAP operating margin was 18.9%, up 1.5 percentage points. Adjusted operating margin increased 0.8 percentage points to 21.9%.
Olin said margin improvement reflected contractual price escalation, productivity gains and integration savings, partially offset by rising manufacturing costs, higher year-over-year tariffs and unfavorable mix. He said the company continues to benefit from Integration 3.0, its productivity and simplification program.
Olin told analysts that Wabtec expects most of its full-year margin expansion to occur in the second half, particularly in the fourth quarter. He attributed that outlook to moderating year-over-year tariff headwinds, productivity momentum from Integration 3.0 and portfolio optimization, and comparisons against prior-year items that are not expected to repeat.
Asked whether tariff mitigation actions could become permanent, Santana said some supply chain changes already had structural value, while others depend on greater stability in tariff rates. "Yes, where we can, we've moved products from higher tariff areas to lower tariff in the U.S.," he said.
Guidance Raised for 2026
Wabtec raised its full-year 2026 guidance following the stronger second-quarter results. Santana said the company now expects revenue of approximately $12.5 billion at the midpoint, representing growth of 11.5% from last year and an increase of one percentage point from prior guidance. The company also raised adjusted EPS guidance to a range of $10.60 to $10.90, up 20% at the midpoint.
Olin said the revenue guidance increase was largely tied to stronger flow business, which accounts for about 30% of Wabtec's revenue, while the remaining 70% is supported by longer-term agreements. He said North American carloads were up nearly 3% in the first half and 4% in the second quarter, helping drive demand tied to locomotive operations and aftermarket activity.
Management said it expects year-over-year revenue growth to moderate in the second half as Wabtec laps the inclusion of Inspection Technologies in prior-year results. Olin said revenue growth is expected to be slightly higher in the third quarter than in the fourth, while margin growth is expected to accelerate meaningfully in the fourth quarter.
Management Cites International Demand, Digital and Modernization Opportunities
Santana said freight market indicators remain mixed, but international opportunities are strong as infrastructure expansion and upgrade projects continue to support the company's order pipeline. In North America, he said industry active locomotive fleet levels increased from the prior-year second quarter, while the railcar build outlook for 2026 is now approximately 25,000 cars, down 21% from 2025.
On digital offerings, Santana said Wabtec is seeing deeper international penetration, pointing to Positive Train Control, automation and related technologies as increasingly important to global rail customers.
The company also discussed its EVO Advantage modernization program. Santana said Wabtec received its first North American order for the program in the second quarter and views modernization as a way to refresh its installed base while delivering fuel efficiency benefits to customers.
Wabtec ended the quarter with more than $2 billion in liquidity and a net debt leverage ratio of 2.2 times. Olin said the ratio remained within the company's stated range of 2.0 to 2.5 times even after funding the roughly $1 billion Dellner acquisition in the first quarter and repurchasing $457 million of shares in the first half. During the second quarter, Wabtec repurchased $215 million of shares and paid $53 million in dividends.
About Wabtec (NYSE:WAB)
Wabtec Corporation (Westinghouse Air Brake Technologies Corporation) is a global provider of equipment, systems and services for the rail industry. The company supplies products and solutions to freight railroads, transit agencies and other industrial operators, focusing on technologies that improve the performance, safety and efficiency of locomotives and rail networks. Wabtec's business spans new equipment manufacturing, aftermarket parts and services, and digital and control systems for rail operations.
Product and service offerings include locomotive systems and components, braking and air systems, propulsion and traction equipment, signaling and control technologies, and a range of aftermarket services such as maintenance, remanufacturing, parts distribution and fleet modernization.
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