Executive Summary

Q2 2025 delivered mixed headline results: EPS beat on strong margins while revenue missed on a locomotive shipment delay. Adjusted EPS was $2.27 (+15.8% y/y) vs. S&P Global consensus $2.18*, while revenue was $2.71B (+2.3% y/y) vs. $2.77B*; adjusted operating margin expanded 180 bps to 21.1% despite the revenue shortfall .
Management raised 2025 guidance: revenue to $10.925–$11.225B (midpoint up $200M) and adjusted EPS to $8.55–$9.15 (midpoint +$0.20), reflecting H1 performance, M&A, and cost discipline; cash conversion remains >90% for FY25 .
Freight sales were flat y/y as a supplied-part issue shifted ~$60M of locomotive revenue to 2H25; Transit was strong (+8.7% y/y). 12‑month backlog rose 11.9% y/y to $8.21B; liquidity $4.09B; leverage ~1.4x pre-acquisition .
Stock catalysts: catching up delayed loco deliveries in 2H, synergy delivery from Inspection Technologies and announced bolt‑ons, and continued margin expansion; watch mix headwind as equipment ramps and services moderates in 2H .

What Went Well and What Went Wrong

What Went Well

Margin and EPS execution: Adjusted operating margin rose to 21.1% (+180 bps y/y) and adjusted EPS rose 16% y/y despite a revenue miss, aided by favorable mix and proactive cost control. CEO: “another strong quarter, highlighted by margin expansion and double digit earnings per share growth.”
Transit strength and backlog visibility: Transit sales +8.7% y/y with meaningful margin expansion (adjusted OM 15.2%, +250 bps); 12‑month backlog +11.9% y/y to $8.21B supports near‑term visibility .
Capital allocation and guidance raise: FY25 adjusted EPS range increased to $8.55–$9.15 and revenue midpoint raised by $200M; $94M returned via dividends and buybacks in Q2, liquidity $4.09B .

What Went Wrong

Revenue shortfall from supplied-part issue: ~${\sim}60$M of locomotive revenue slipped from Q2 into 2H25; consolidated revenue (+2.3% y/y) came in below expectations and consensus .
Lower cash conversion in quarter/YTD: Operating cash flow $209M (Q2) and 46% cash conversion vs. 57% in Q2’24, driven by higher working capital (inventories up on delayed deliveries, timing of deposits) .
Mix headwinds ahead: Management flagged 2H mix reversal as equipment (lower margin) accelerates on catch‑up and services moderates; expect 2H margin growth to be strong but less than 1H’s 180 bps .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025	Consensus (Q2 2025)
Revenue ($B)	$2.64	$2.61	$2.71	$2.7716*
GAAP Diluted EPS ($)	$1.64	$1.88	$1.96	$2.1809*
Adjusted Diluted EPS ($)	$1.96	$2.28	$2.27	$2.1809*
GAAP Operating Margin (%)	16.3%	18.2%	17.4%	—
Adjusted Operating Margin (%)	19.3%	21.7%	21.1%	—
GAAP Gross Margin (%)	33.0%	34.5%	34.7%	—
Cash from Operations ($M)	$235	$191	$209	—

Values marked with an asterisk are from S&P Global consensus. Values retrieved from S&P Global.

Segment performance and product mix

Freight: Net sales $1.919B (flat y/y); adjusted OM 25.0% (+90 bps y/y). Services +6% offset by lower locomotive deliveries and mining; delayed deliveries expected to shift into 2H25 .
Transit: Net sales $787M (+8.7% y/y); adjusted OM 15.2% (+250 bps y/y) on higher sales and gross margin improvement .

Segment ($M unless noted)	Q2 2024	Q2 2025
Freight Net Sales	$1,920	$1,919
Freight Adj. Operating Margin %	24.1%	25.0%
Transit Net Sales	$724	$787
Transit Adj. Operating Margin %	12.7%	15.2%

Product line detail

Product Line ($M)	Q2 2024	Q2 2025	y/y
Services	$737	$781	+6.0%
Equipment	$570	$546	-4.2%
Components	$414	$401	-3.1%
Digital Intelligence	$199	$191	-4.0%

EBITDA reconciliation (consolidated)

Metric	Q2 2024	Q2 2025
EBITDA ($M)	$550	$611
Adjusted EBITDA ($M)	$555	$608

Backlog and liquidity

KPI	Jun 30, 2024	Mar 31, 2025	Jun 30, 2025
12‑Month Backlog ($M)	$7,334	$8,196	$8,210
Total Backlog ($M)	$22,075	$22,302	$21,828
Liquidity ($B)	—	—	$4.09
Cash & Equivalents ($B)	—	—	$1.50
Total Debt ($B)	—	—	$4.78
Net Debt Leverage (x)	—	—	~1.4x

Why results differed vs. estimates

Revenue miss (~~$66M) driven by a supplied-part issue that delayed locomotive deliveries (~~$60M impact), now expected to be caught up by year‑end. Mix favorability (lower loco shipments in Q2) and cost actions supported margin and EPS beats .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($B)	FY 2025	$10.7–$11.0	$10.925–$11.225	Raised (midpoint +$0.20B)
Adjusted EPS ($)	FY 2025	$8.35–$8.95	$8.55–$9.15	Raised (midpoint +$0.20)
Operating Cash Flow Conversion	FY 2025	>90%	>90%	Maintained

Management noted update reflects H1 performance, the July 1 closing of the Inspection Technologies acquisition, and prudent cost management .

Earnings Call Themes & Trends

Topic	Q4 2024 (Prev‑2)	Q1 2025 (Prev‑1)	Q2 2025 (Current)	Trend
Tariffs / Macro	Discussed tariff scenario management; 2025 guide excludes M&A, portfolio opt reduces ~$100M revenue; emphasize cost actions and pricing for value .	Guide included first‑round tariffs; reciprocal tariffs excluded; balancing sourcing, pricing, and cost actions .	“Tariff plan fluid”; 2025 guidance includes tariffs levied through Q2; not expected to materially impact 2025 earnings; further proposals to be incorporated in Q3 .	Managed, monitored; not a 2025 EPS risk per mgmt
Supply chain / Deliveries	Level‑loaded production; expected sequential margin pop in Q1’25 .	Mix shift: equipment to rise, services moderate; warned of lower mix tailwind vs Q1 .	Supplied‑part issue delayed ~$60M of loco revenue; catch‑up expected by YE; 2H revenue +~10% at midpoint; 3Q≈4Q revenue .	Q2 disruption with recovery planned in 2H
Backlog / Pipeline	Orders converted >$1B in Q4; 12‑mo backlog $7.7B; strong international pipeline .	12‑mo backlog $8.2B; intl pipeline strongest since merger; highlighted Africa/APAC/CIS .	12‑mo backlog $8.21B (+11.9% y/y); pipeline “stronger” than 18 months ago; visibility into 2026+ .	Improving near‑term coverage
M&A / Integration	Announced Integration 3.0: $100–$125M run‑rate savings by 2028; portfolio optimization continues .	EPS midpoint raised; revenue unchanged; capital discipline and leverage plan ahead of Evident closing .	Closed Inspection Technologies July 1; three deals (~$3.5B commitments); accretive EBITDA/ EPS/ROIC; leverage pro‑forma ~2.2x after closing .	Active, accretive bolt‑ons
Digital / Automation / Regulation	Digital orders ~$1B in 2024; advancing automation; FRA process supportive .	Digital TAM expansion; international demand offsetting NA softness; railcar telematics platform expanded to Europe .	FRA progress on “Zero‑to‑Zero” air brake control; continued automation opportunities; digital synergy with Inspection Tech .	Positive regulatory tone; digital scaling
Transit execution	Q4 transit adj OM 16.4% (+150 bps); selective growth .	Transit adj OM 14.6% (+190 bps); backlog positive .	Transit sales +8.7%; adj OM 15.2% (+250 bps) on mix/ops .	Sustained margin expansion

Management Commentary

“The Wabtec team has delivered another strong quarter, highlighted by margin expansion and double digit earnings per share growth… Demand across our end markets and our pipeline of opportunities continues to be strong.” — Rafael Santana, CEO .
“Q2 revenues were adversely impacted due to a supply part issue… net impact approximately $60 million… we expect to catch up… by the end of the year.” — John Olin, CFO .
“Adjusted operating margin in Q2 was 21.1%, up 1.8 points… driven by improved gross margins and operating expenses growing at a slower rate than revenue.” — John Olin, CFO .
“We increased our 2025 sales outlook to ~$11.1B at the midpoint… and adjusted EPS to $8.55–$9.15.” — Rafael Santana, CEO .
“Tariffs are not expected to have a material impact on our 2025 earnings… guidance includes all tariffs levied through the end of the second quarter.” — Management .

Non‑GAAP adjustments (Q2)

Adjusted EPS $2.27 vs. GAAP $1.96 reflects add‑backs: non‑cash amortization $0.31, restructuring/portfolio optimization $0.02, and transaction‑related net $(0.02) .

Q&A Highlights

Tariffs: Management expects no material 2025 EPS impact from tariffs included through Q2; will incorporate any additional actions in Q3. High U.S. sourcing and four‑pronged mitigation (USMCA qualification, supply chain shifts, inventory positioning, pricing) support resilience .
2H cadence/mix: 2H revenue to grow ~10% at guide midpoint; 3Q and 4Q revenues “largely the same” with 4Q margins higher; mix headwind as equipment accelerates and mods down ~30% in 2H, though full‑year loco+mods up high‑single‑digits .
Capital allocation / leverage: Priority to reduce leverage ahead of Frosch closing by YE25; continuing M&A focus with accretive financials and strategic fit .
Regulatory/automation: Positive momentum with FRA waivers (e.g., Zero‑to‑Zero air brake control); potential for automation to support safety and efficiency .
International demand: Strength across Africa, Asia, Brazil, CIS; 12‑mo backlog >$8B for second straight quarter; improving visibility into 2026+ .

Estimates Context

Q2 vs S&P Global consensus: Revenue $2.706B vs $2.7716B* (miss ~2.4%); Adjusted/Primary EPS $2.27 vs $2.1809* (beat ~4.1%); EBITDA $611M vs $613.0M* (slight miss) .
FY25 consensus prior to guide raise: Revenue $11.065B*; EPS $8.967* vs company guidance $10.925–$11.225B and $8.55–$9.15 (guidance range brackets consensus on revenue; EPS range brackets consensus around midpoint) .