Wabco Holdings, Inc. (WBC) hit a new 52-week high in early May after reporting an awesome Q1 100% earnings surprise of 104%. Estimates are on the rise as shares trade at a slight discount to its peer group.
Company Description
Wabco Holdings, Inc. develops, manufactures and sells braking, stability and transmission control systems for commercial vehicles worldwide. The company was founded in 1869 and has a market cap of $1.89 billion.
Wabco suffered in the great recession of 2008 and 2009 just like many other companies, with its earnings and share price taking a sizeable hit. But the company’s business is rebounding nicely now that the global economy is showing signs of stability, helping it report better than expected Q1 results on May 5 that included a 104% earnings surprise.
First-Quarter Results
Revenue for the period was up 47% from last year to $491 million. Earnings also came in strong at 51 cents, 104% ahead of the Zacks Consensus Estimate. The company has been easily exceeding expectations over the last three quarters with an average earnings surprise of 181%.
Wabco’s growth is definitely being driven by its presence in emerging markets like Brazil and China, accounting for two thirds of its 36% gain in worldwide sales. CEO Jacques Esculier noted that 75% of the world’s truck and bus production took place in India, China and Brazil, demonstrating the source of demand for the company’s commercial transports parts.
Wabco also said that it is seeing signs of stability in Europe, where new registrations for heavy duty trucks increased 5%, the first gain in more than two years.
Healthy Balance Sheet
With a solid financial history and strong operating cash flow, Wabco has a healthy looking balance sheet, with $346 million in cash and equivalents and just $154 million in debt.
Estimates Rising
After Wabco raised its full-year guidance, analysts were quick to follow suit, with the current year climbing 49 cents to $1.77. The next-year estimate is up 37 cents in the same time to $2.58, a bullish 46% growth projection.
Although Wabco’s forward P/E of 16X is in line with its peers, its PEG ratio of .34% puts it deep into value territory.
18-Month Chart
WBC hit a new multi-year high in early May before pulling back a bit in the recently weak and volatile market. As it stands, shares are pressuring a key level of support at the long-term trend line with a neutral reading on the stochastic, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
