Momentum: WABCO Holdings (WBC)

WABCO Holdings, Inc. (WBC) just hit a new multi-year high at $39.37 after reporting better than expected Q2 results that included a 21% earnings surprise. Estimates are on the move and the valuation picture looks solid, providing plenty of upward momentum for this Zacks #1 rank stock.

Company Description

WABCO Holdings, Inc. develops and manufactures braking, suspension and transmission control systems for commercial vehicles like buses and trucks in the United States and internationally. The company was founded in 1869 and has a market cap of $2.46 billion.

The rising economic tide has lifted many companies, including Wabco, which is seeing big sales gains across all of its global regions as consumers and business regain the confidence to spend again. That dynamic helped the company deliver awesome Q2 results that handily beat expectations.

Second-Quarter Results

Revenue for the period was up 62% from last year to $512 million. Earnings also came in strong at 63 cents, 21% ahead of the Zacks Consensus Estimate, moving the company’s average earnings surprise over the last four quarters to 141%.

Placing the success of the quarter in context, CEO Jacques Esculiar noted that for the first time in two years, every region of its global business saw revenue gains, all up more than 50% from last year except for North America, which saw a 12% gain.

Wabco’s awesome sales growth has also been accompanied by ongoing attention to managing its expenses, helping push its operating margin up to 10.3% from negative 1.7% last year.

Balance Sheet

Wabco also used the good quarter to strengthen its balance sheet, boosting its cash position by $7 million to $370 million and paying down $11 million in debt for a total debt load of $144 million.

Estimates

The good quarter pushed estimates higher, with the current year adding 26 cents to $2.19 and the next year adding 14 cents to $2.89, a bullish 32% growth projection.

Valuation

But in spite of the recent string of gains and new high, WBC still has value, trading with a forward P/E multiple of 18X against its peer’s 23X.

2-Year Chart

WBC hit a new multi-year high on the good quarter after rebounding from a long-term trend line in late May. Look for more support from the trend line on any weakness, take a look below.

WABCO HOLDINGS (WBC): Free Stock Analysis Report

About Michael Vodicka 49 Articles

Affiliation: Zacks Investment Research

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