Update: Sterne Agee Raising Price Target On WABCO Holdings (WBC)

Sterne Agee is raising its price target and estimates on shares of WABCO Holdings WBC to $89, and it is reiterating its Buy rating on shares. In a note to investors, Sterne Agee writes, "We reiterate our Buy rating on WABCO. We believe our thesis is playing out on the cyclical front, with a strong recovery in European (63% of revs) truck production, as well as U.S. build rates (9% of revs). If Europe continues to grow ~25% above FY2010, truck production will still be 25% below the 2008 peak. European truck capacity utilization is above 90% and we would continue to favor a cyclical growth play when we are perhaps a year into a 3 – 4 year cycle. In the U.S., we could in fact be short 55,000 Class 8 trucks, and estimates for a 50 – 60% production increase may prove conservative. Here too, we may be in year 2 of a 4 – 5 year steadier replacement cycle. On the secular growth side, content per vehicle is increasing. ABS adoption in China and India are moving at a remarkable rate; y-o-y sales have doubled. The agreement with Shaanxi Fast Gear Co. will give WBC an opportunity to place AMT in the almost 850,000 transmissions systems Shaanxi builds a year, with adoption rates expected to go from 0 to above 50% over the next 3 years. Paccar (PCAR – $53.11 – NTRL) is now offering Air Disc Brakes as standard equipment on the front axles of their trucks. A shift to shorter hauls will favor Air Disc brakes over drum brakes for safety reasons, as well as lifecycle cost management." Shares of WBC are up 78 cents in early Monday trading to $74.63, a gain of 1.06%.