Freight Margins Outlook
Q: What drove freight margins between Q3 and Q4, and what's the 2024 outlook?
A: Management explained that the perceived decline from Q3 to Q4 was due to seasonality. Company margins were up 1.7%, with Freight segment margins increasing by 2.3 percentage points in Q4. " They expect both Freight and Transit segments to grow revenue and margins in 2024. "

Revenue Growth Guidance vs. Backlog
Q: Why is revenue growth guidance at 5% when the backlog is up 10%?
A: Despite a 10% increase in backlog, the conservative 5% revenue growth guidance accounts for factors like low North American carloads, increased parking, and a decline in freight car builds. " " The company aims to overdeliver, with improved backlog coverage extending beyond 2024. "

Mods and New Locomotives Growth
Q: Will mods and new locomotive orders continue double-digit growth in 2024?
A: Yes, both mods and new locomotives are expected to grow faster than average revenue in 2024. " Strong growth is anticipated, supported by recent orders and the oldest fleet on record, creating opportunities domestically and internationally. " "

California Regulations Impact
Q: How might California's new locomotive regulations affect demand?
A: The regulatory outcome is uncertain, but Wabtec is well-positioned. " Their entire installed base can utilize bio and renewable fuels, and they are testing alternative fuels like hydrogen. " Regulatory changes are not included in current guidance, so any impact would be a tailwind. "

Capital Allocation and Share Buybacks
Q: How will cash flow be used between repurchases and M&A in 2024?
A: The company will prioritize M&A over share repurchases if strategic opportunities exist; otherwise, excess cash will go to buybacks. " They have a new $1 billion share repurchase authorization, and the guidance includes expected use of cash for share buybacks and M&A in 2024. "

Integration 2.0 and Cost Savings
Q: What's the expected impact of Integration 2.0 on cost savings?
A: Integration 2.0 is progressing well, with a run rate of $22 million in savings exiting 2023. " They expect to exit 2025 with a run rate of $75 million to $90 million in savings, implying significant ramp-up over the next two years. " "

International vs. Domestic Growth and Margins
Q: How does international growth compare to domestic, and what's the margin impact?
A: Stronger international growth is expected, especially beyond 2024, driven by a robust pipeline. " Margins are project-dependent, but faster growth in new locomotives and mods may create headwinds. "

Digital Intelligence Business Outlook
Q: What's the outlook for the digital intelligence segment?
A: While North American demand is softer due to discretionary OpEx cuts, the pipeline remains strong internationally and in digital mining solutions. " Entering the railcar telematics market, a multibillion-dollar opportunity with 1.6 million freight cars, is expected to propel growth. "

North American Rail Volumes Impact
Q: How could declining North American rail volumes affect service revenue?
A: Muted carload expectations are included in guidance. " Continued customer investments in productivity and cost reductions are expected to offset potential volume declines, keeping the active fleet stable. "

Cash Flow and CapEx Expectations
Q: Is 2% of sales a sustainable CapEx rate, and how does it affect free cash flow?
A: CapEx is expected to remain around 2% of sales over the investment horizon. " This supports strong free cash flow conversion, with operating cash flow over 90% of net income. "