Deutsche Bank On Wabtec: 'Get Aboard This Train'

Westinghouse Air Brake Technologies Corp WAB (also known as Wabtec) a supplier of value-added products and services for rail markets, could achieve its earnings guidance over the coming years that supports a bullish stance on the stock, according to Deutsche Bank.

The Analyst

Deutsche Bank's Saree Boroditsky upgraded Wabtec from Hold to Buy with a price target lifted from $95 to $105.

The Thesis

Wabtec's management presented a five-year strategic plan at its investor day in which earnings per share could double from $3.80 in 2018 to more than $7.60 per share by 2022, Boroditsky said in a note. Moreover, operating profit could reach $1 billion and top-line growth of 9 percent could also be seen.

Investor sentiment on the stock remains "relatively negative" with a high short interest, the analyst said. However, the Street is underappreciating Wabtec's earnings power potential and ability to achieve its guidance for three reasons:

Better-than-expected freight volumes over the coming years;
A recovery in Freight and margin improvement in Transit; and
Potential for incremental upside if the reported transformational deal with GE Transportation becomes a reality.

The analyst's revised price target of $105 is based on an approximate 2x multiple on expected 2019 earnings per share of $4.67. Boroditsky said investors are encouraged to "get aboard this train."