WABCO Expected To Have Strong 3Q

The tone from the European truck market points to better than seasonal trends in 3Q, implying upside to 3Q consensus at WABCO WBC. While strong stock performance YTD and uncertainty around 2011 keeps J.P. Morgan at Neutral, the likelihood of another earnings beat should support the stock near term, and JPM sees an upside trade into the quarter. On 3Q trends, analyst meetings with OEMs and suppliers suggest that truck deliveries are likely to be up 0-5% versus last quarter 2Q10, stronger than the usual seasonal decline of 20-25%. This is driven by strength in Germany, France, and Eastern Europe, only partially offset by weakness in Southern Europe. A better than expected 3Q in Europe would be positive for WBC, implying upside to JPM's Street-high estimate for 3Q (JPM $0.54, Street $0.50), and see a trade into the quarter. WBC reports 3Q earnings in late October. Sales into the European truck and bus market represent ~70% of company revenues. WBC is trading lower at $41.49