Rail equipment company Westinghouse Air Brake Technologies (NYSE: WAB) met Wall Street’s revenue expectations in Q3 CY2025, with sales up 8.4% year on year to $2.89 billion. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $11.08 billion at the midpoint. Its non-GAAP profit of $2.32 per share was 2% above analysts’ consensus estimates.

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“The Wabtec team delivered a very strong quarter, evidenced by continued growth in our backlog, sales, margin, and earnings,” said Rafael Santana, Wabtec’s President and CEO.

Company Overview

Also known as Wabtec, Westinghouse Air Brake Technologies (NYSE: WAB) provides equipment, systems, and related software for the railway industry.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Wabtec grew its sales at a mediocre 6.4% compounded annual growth rate. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about Wabtec.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Wabtec’s annualized revenue growth of 6.8% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. We also note many other Heavy Transportation Equipment businesses have faced declining sales because of cyclical headwinds. While Wabtec grew slower than we’d like, it did do better than its peers.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Wabtec’s organic revenue averaged 6.2% year-on-year growth. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Wabtec grew its revenue by 8.4% year on year, and its $2.89 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 9.2% over the next 12 months, an improvement versus the last two years. This projection is particularly noteworthy for a company of its scale and indicates its newer products and services will catalyze better top-line performance.

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Operating Margin

Wabtec has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 13.7%.

Analyzing the trend in its profitability, Wabtec’s operating margin rose by 6.5 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Wabtec generated an operating margin profit margin of 17%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Wabtec’s EPS grew at a spectacular 17.4% compounded annual growth rate over the last five years, higher than its 6.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Wabtec’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Wabtec’s operating margin was flat this quarter but expanded by 6.5 percentage points over the last five years. On top of that, its share count shrank by 10%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Wabtec, its two-year annual EPS growth of 22.6% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Wabtec reported adjusted EPS of $2.32, up from $2 in the same quarter last year. This print beat analysts’ estimates by 2%. Over the next 12 months, Wall Street expects Wabtec’s full-year EPS of $8.55 to grow 14.3%.

Key Takeaways from Wabtec’s Q3 Results

We were impressed by how significantly Wabtec blew past analysts’ organic revenue expectations this quarter, although reported revenue was just in line. We were also happy its EPS outperformed Wall Street’s estimates. Looking ahead, management slightly raised its full-year EPS guidance. Overall, this print had some key positives. The stock traded up 1.8% to $201.49 immediately following the results.

Wabtec had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.