Wabtec Corp., a manufacturer of products for the freight and passenger rail markets, reported Feb. 21 a sharp decline in profits during the previous quarter and year as major freight rail carriers hit a slump.
The Wilmerding, Pennslyvania-based company reported fourth-quarter earnings of $38 million, or 42 cents a share, down from $102 million, or $1.05 a share, in the last three months of 2015. Excluding one-time charges, earnings would have been 81 cents per share.
Analysts polled by Thomson Financial had been looking, on average, for 94 cents.
Much of the drop in fourth-quarter earnings — about $27 million, according to the company — came from expenses related to completing the long-awaited acquisition of Faiveley Transport, a French rail products manufacturer that Wabtec purchased for $1.7 billion in December.
For the full year, Wabtec reported a profit of $305 million, or $3.34 a share, compared with the $399 million, or $4.10 a share, it made in 2015.
For years, Wabtec’s profits climbed to record heights as freight rail providers demanded more components for its locomotives and cars. But a decline in coal, oil and fracking products has put a dent in rail traffic.
Wabtec’s freight sales plummeted by 25% over the course of 2016, the company reported. Meanwhile, products sold into passenger rail markets increased 11% — not nearly enough to offset the decline in freight sales.
Overall sales for the year fell to $2.9 billion, down from $3.3 billion in 2015.
“During 2016, we faced many challenges, including significant headwinds in our freight and industrial markets,” said Raymod Betler, Wabtec’s president and chief executive officer. “We will continue to control what we can be managing our costs aggressively, while working diligently on the integration of Faiveley.”
The company expects market conditions to persist through the first half of this year but things to improve in the second half, according to its updated 2017 financial outlook. It expects earnings per share to fall between $3.95 and $4.15, with the ramp up of backlogged rail projects and the boost from Faiveley.
Wabtec shares were down Feb. 21 more than 5% at 10 a.m., trading at $82.97.
