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    WAB
    Earnings call· Jun 2026(Q2 FY26)

    WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORP WAB

    Jul 22, 2026 Source

    Executive summary

    Westinghouse Air Brake Technologies Corporation Q2 FY26 — Strong Growth and Raised Outlook

    Wabtec delivered a strong second quarter, surpassing expectations with robust revenue and double-digit EPS growth, driven by solid operational execution and strategic acquisitions. The company raised its full-year guidance, citing a healthy pipeline and significant backlog expansion, particularly in international markets. Management remains focused on productivity gains and integration initiatives to sustain margin expansion despite ongoing inflationary pressures and supply chain challenges.

    Highlights

    5

    • Second quarter sales increased 17.5% year-over-year to $3.18 billion, exceeding expectations.

    • Adjusted EPS grew 21.6% year-over-year to $2.76, driven by stronger revenue and margin expansion.

    • Multiyear backlog surged 42% year-over-year to over $30 billion, providing strong future growth visibility.

    • Full-year 2026 revenue guidance raised by 1 percentage point to approximately $12.5 billion at the midpoint.

    • Full-year 2026 adjusted EPS guidance raised by $0.30 to a range of $10.60 to $10.90.

    Concerns

    4

    • North American railcar build forecast for 2026 is approximately 25,000 cars, down 21% from 2025.

    • Component sales were down 0.7% year-over-year due to the decline in North American railcar build and portfolio optimization efforts.

    • Full-year services revenue is expected to be down due to lower modernization deliveries in the first half of the year.

    • The company continues to face headwinds from tariff impacts, unfavorable business mix, and challenging prior-year comparisons.

    Guidance & targets

    14
    CategoryTargetConfidence
    Full-year 2026 Revenue
    approximately $12.5 billion
    high materiality
    High
    Full-year 2026 Revenue Growth
    up 11.5%
    high materiality
    High
    Full-year 2026 Adjusted EPS
    $10.60 to $10.90
    high materiality
    High
    Full-year 2026 Adjusted EPS Growth
    up 20% at the midpoint
    high materiality
    High
    Second Half 2026 Revenue Growth
    to temper
    medium materiality
    Medium
    Second Half 2026 Margin Expansion
    majority to occur in the back half
    medium materiality
    High
    Q3 2026 Revenue Growth
    slightly higher than Q4
    low materiality
    Medium
    Q4 2026 Margin Growth
    meaningful acceleration
    medium materiality
    High
    Q3 2026 Margin Growth
    generally consistent with H1 rates
    low materiality
    Medium
    Full-year Services Revenue
    to be down
    medium materiality
    High
    Second Half Modernization Deliveries
    to grow
    low materiality
    High
    Second Half Equipment Revenue Growth
    remain positive, but at a very moderate pace
    medium materiality
    Medium
    North American Railcar Build Forecast 2026
    approximately 25,000 cars
    medium materiality
    Medium
    North American Railcar Build Forecast 2027
    turns in 2027
    low materiality
    Low

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Freight
    Strong sales growth driven by higher locomotive deliveries and increased mining sales. Margin improvement due to higher gross margin and mix from acquisitions, partially offset by increased operating expenses.
    GAAP segment operating income: $504 millionGAAP operating margin: 22.5%, up 0.9 percentage points YoYAdjusted operating income: $579 million, up 20.6% YoYAdjusted operating margin: up 0.8 percentage points YoYGross margin increase: 1.7 percentage pointsOperating expense as % of revenue increase: 0.9 percentage points12-month backlog: $6.64 billion, up 10.2%Multiyear backlog: $25.33 billion, up 47.8%
    		$2.24 billion16.9%—25.8%
    Transit
    Robust revenue growth driven by the Delmar acquisition and growth across products and services. Strong margin expansion due to underlying business momentum and the Delmar acquisition.
    Sales ex-currency: up 17.7%GAAP operating income: $146 millionAdjusted segment operating income: $166 millionAdjusted operating margin: up 2.5 percentage points YoYPurchase accounting charges and noncash amortization: $20 million12-month backlog: $2.5 billion, up 14.5%Multiyear backlog: up 19.4%
    		$936 million18.9%—17.7%

    Operational metrics

    30
    Sales
    $3.18 billionup 17.5% YoY
    Q2 FY26

    Exceeded expectations, with strong contributions from both Freight and Transit segments.

    Sales (excluding currency impact)
    up 16.6%YoY
    Q2 FY26

    Reflects underlying sales growth without foreign currency fluctuations.

    GAAP Operating Income
    $600 millionup 27.1% YoY
    Q2 FY26

    Predominantly driven by higher sales, improved gross margin, and lapping prior year's transaction costs.

    Adjusted Operating Margin
    21.9%up 0.8 percentage points YoY
    Q2 FY26

    Improvement achieved despite tariff-related headwinds, unfavorable mix, and tough year-over-year comps.

    GAAP Earnings Per Diluted Share
    $2.33up 18.9% YoY
    Q2 FY26

    Reflects overall financial performance for the quarter.

    Adjusted Earnings Per Diluted Share
    $2.76up 21.6% YoY
    Q2 FY26

    Reflects strong execution and resilience of the business.

    Net Pretax Charges (Purchase Accounting & Transition Costs)
    $6 million
    Q2 FY26

    Associated with recent acquisitions.

    GAAP Gross Margin
    36.5%up 1.8 percentage points YoY
    Q2 FY26

    Reflects improved profitability at the gross level.

    Adjusted Gross Margin
    up 1.9 percentage pointsYoY
    Q2 FY26

    Reflects improved profitability at the gross level on an adjusted basis.

    GAAP Operating Margin
    18.9%up 1.5 percentage points YoY
    Q2 FY26

    Reflects overall operating profitability.

    SG&A Expenses
    higherYoY
    Q2 FY26

    Due largely to SG&A expense associated with acquisitions.

    Engineering Expense
    $70 million$20 million higher YoY
    Q2 FY26

    Primarily due to acquisitions and continued investment in future technologies.

    Cash Conversion
    82%
    Q2 FY26

    Reflects efficiency in converting earnings to cash.

    Liquidity Position
    over $2 billion
    Q2 FY26

    Indicates a very strong balance sheet and financial position.

    Net Debt Leverage Ratio
    2.2x
    Q2 FY26

    Remained within the stated target range, even after significant acquisitions and share repurchases.

    Share Repurchases
    $215 million
    Q2 FY26

    Part of disciplined capital allocation framework.

    Dividends Paid
    $53 million
    Q2 FY26

    Part of capital allocation framework.

    Organic Growth
    8.5%
    Q2 FY26

    Represents an acceleration from Q1, with approximately half of total revenue growth driven organically.

    Organic Growth
    5.5%
    H1 FY26

    Best way to look at organic growth, taking care of timing nuances.

    Equipment Sales Growth
    35%YoY
    Q2 FY26

    Driven by higher locomotive deliveries and increased mining sales.

    Component Sales Growth
    -0.7%YoY
    Q2 FY26

    Due to industry decline in North America railcar build and lower revenue from portfolio optimization efforts, partially offset by industrial product sales.

    Digital Intelligence Sales Growth
    88.5%YoY
    Q2 FY26

    Driven by contributions from Inspection Technologies and Froster acquisitions.

    Foreign Currency Exchange Impact on Sales
    1.3 percentage pointsfavorable
    Q2 FY26

    Positive impact on sales in the quarter.

    North America Carload Traffic Growth
    4%YoY
    Q2 FY26

    Contributed to an increase in Wabtec's active locomotive fleet.

    North America Carload Traffic Growth
    just shy of 3%YoY
    H1 FY26

    Overall carload growth in the first half.

    North America Active Locomotive Fleet
    upYoY
    Q2 FY26

    As a result of carload traffic growth.

    Integration 3.0 Cost Savings (Q1 Guidance)
    $15 million
    Q1 FY26

    Amount by which guidance was raised in Q1 due to momentum and timing of Integration 3.0 projects.

    Prior Year Q4 Cash Conversion
    just shy of 300%
    Q4 FY25

    A factor contributing to the expected strong Q4 FY26 margin growth due to lapping a high expense.

    Long-term Margin Growth
    350+ basis points
    Long-term

    Expected margin growth over the long term, with contributions from productivity and value-added activities.

    Share Repurchases
    $457 million
    H1 FY26

    Total share repurchases in the first half of the year.

    Industry KPIs

    3
    MetricValueDetails
    Tariff cost impact—
    Data center prime power demandvery, very nominal sales
    Industry production market size forecastsapproximately 25,000 carsunits

    Orderbook & backlog

    6
    12-month backlogup 11%Q2 FY26

    YoY

    Multiyear backlogover $30 billionQ2 FY26

    up 42% YoY

    Freight segment 12-month backlog$6.64 billionQ2 FY26

    up 10.2%

    Freight segment multiyear backlog$25.33 billionQ2 FY26

    up 47.8%

    Transit segment 12-month backlog$2.5 billionQ2 FY26

    up 14.5%

    Transit segment multiyear backlogup 19.4%Q2 FY26

    YoY

    Deals & partnerships

    7
    Australian customerOrder for locomotives, services, components, and digital solutions$1 billion

    Secured during the quarter, spanning across locomotives, services, components and digital solutions.

    ValeOrder for positive train control (PTC)$184 million

    Signed for positive train control with Vale, marking an important step forward in Brazil's rail network.

    Grand Paris Express projectOrder for platform doors$55 million

    Awarded for platform door order for the Grand Paris Express project in the Transit segment.

    APAC mining customerOrder to supply Drive Systems for 240-ton mining trucks$52 million

    Secured by the APAC team to supply Drive Systems for 240-ton mining trucks.

    DelmarAcquisitionapproximately $1 billion

    Acquisition funded during the first quarter.

    Inspection TechnologiesAcquisition

    Acquisition contributed to Digital Intelligence sales and overall performance.

    FrosterAcquisition

    Acquisition contributed to Digital Intelligence sales and overall performance.

    Risks & headwinds

    6
    Tariff Headwindsongoing

    unfavorable business mix and challenging prior year comparisons

    Mitigation: Tempering year-over-year tariff impacts in H2, supply chain adjustments, and pricing strategies.

    Unfavorable Business MixQ2 FY26

    unfavorable mix

    Mitigation: Focus on productivity and efficiency, Integration 3.0.

    Inflationary Pressuresongoing

    rising manufacturing costs

    Mitigation: Cost recovery from contractual price escalation, productivity gains, and integration savings.

    Chip Shortagesongoing

    impact to electronics

    Mitigation: Actively managing supply chain.

    North America Railcar Build DeclineFY26

    down 21% from 2025 (2026 forecast of ~25,000 cars)

    Mitigation: Adjusting operations, driving cost discipline, and focusing on industrial product sales to offset.

    Lower Modernization DeliveriesH1 FY26

    lower number of modernization deliveries that were shipped in the first half

    Mitigation: Expect modernization deliveries to grow in the second half of the year.

    What to watch in Q3 FY26

    5

    Q3 Revenue Growth

    Q3 FY26
    CurrentQ2 organic growth 8.5%
    Targetslightly higher than Q4

    Why it matters

    To confirm the expected cadence of revenue growth in the second half, with Q3 being slightly stronger than Q4.

    When we look at the cadence of growth between the third and the fourth quarters, we expect revenue growth to be slightly higher in the third quarter versus the fourth.

    Q&A highlights

    6

    Inquired about the sustainability of the 12-month backlog and the market outlook for continued order progress, especially given international wins.

    Management confirmed improved demand and strong conversion of pipeline into multiyear backlog, citing significant international opportunities. They noted strong execution driving improved margins through productivity gains and Integration 3.0, despite headwinds like inflation and tariffs. The $110 million revenue guidance raise was largely driven by the flow business, which is expected to continue its growth rate.

    “When we look at the second quarter, Ken, revenue was ahead of expectations as well as earnings. When we look at revenue, revenue was driven by a couple of things. Number one, on more of a sustainable basis. We saw our flow businesses accelerate.”

    asked by Ken Hoexter · answered by John Olin

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q2 Performance and Raised Outlook

    Wabtec delivered a strong second quarter, with sales of $3.18 billion, up 17.5% year-over-year, and adjusted EPS of $2.76, up 21.6%. This performance exceeded expectations, driven by stronger revenue growth and increased operating margin expansion. The company raised its full-year 2026 revenue guidance to approximately $12.5 billion (up 11.5% YoY) and adjusted EPS guidance to $10.60-$10.90 (up 20% at midpoint), reflecting confidence in continued demand and operational execution.

    02

    Backlog Growth and Future Visibility

    The company's backlog remains a key strength, with the 12-month backlog up 11% year-over-year and the multiyear backlog exceeding $30 billion, a 42% increase. This provides strong visibility into profitable growth ahead, particularly with significant international opportunities. The Freight segment's multiyear backlog grew 47.8% to $25.33 billion, while Transit's 12-month backlog increased 14.5% to $2.5 billion.

    03

    Operational Execution and Margin Expansion

    Operating margin expansion was favorable to Q1 results, driven by a better-than-expected product mix and continued focus on productivity and efficiency through programs like Integration 3.0. Adjusted operating margin for Q2 was 21.9%, up 0.8 percentage points year-over-year, despite tariff-related headwinds and unfavorable mix. The company expects the majority of its margin expansion for the year to occur in the second half, with a meaningful acceleration in Q4.

    04

    Segment Performance Highlights

    Both Freight and Transit segments contributed to strong growth. Freight segment sales were up 16.9%, with adjusted operating margin at 25.8%, up 0.8 percentage points. Transit segment sales increased 18.9% to $936 million, and adjusted operating margin improved 2.5 percentage points to 17.7%. Equipment sales were up 35% driven by higher locomotive deliveries and increased mining sales, while Digital Intelligence sales surged 88.5% due to recent acquisitions.

    05

    Strategic Acquisitions and International Wins

    Recent acquisitions, including Inspection Technologies, Froster, and Delmar, are performing well and strengthening Wabtec's portfolio. The company secured a $1 billion order from an Australian customer for locomotives, services, components, and digital solutions, and a $184 million order for positive train control with Vale in Brazil. These wins highlight the breadth of Wabtec's capabilities and strong international demand.

    06

    North American Rail Market Dynamics

    North American carload traffic was up 4% in Q2, leading to an increase in Wabtec's active locomotive fleet. This has positively impacted the company's flow businesses, particularly parts. However, the North American railcar build forecast for 2026 remains challenging, projected at approximately 25,000 cars, down 21% from 2025, impacting component sales.

    AI-generated summary of the company’s earnings call. Not investment advice.