Executive Summary

Q4 2024 delivered modest top-line growth with stronger cash generation: revenue $2.58B (+2.3% YoY), GAAP EPS $1.23 (+2.5% YoY), adjusted EPS $1.68 (+9.1% YoY), and cash from operations $723M; GAAP operating margin rose YoY to 12.9% while adjusted margin was 16.9% (flat vs prior year) .
Mix shift (equipment up, services down) and higher SG&A as a percent of sales tempered adjusted margins vs Q3; management highlighted this cadence was planned and expects margins to “pop back” in Q1 2025 as level-loading evens through the year .
2025 guidance: sales $10.725–$11.025B and adjusted EPS $8.35–$8.75 (midpoint +13% YoY), with >90% cash conversion; long-term plan targets mid-single-digit revenue CAGR, 350+ bps adjusted operating margin expansion, and double-digit EPS CAGR through 2029 .
Transit outperformed with 7.1% sales growth and 150 bps adjusted margin expansion, aided by Integration 2.0 savings and favorable mix; Freight was flat on sales but expanded GAAP margin by 160 bps, benefiting from lower amortization and productivity .
Stock reaction catalyst: management acknowledged investor concern around mid-single-digit revenue outlook versus recent stronger prints; the stock was down ~8% intra-day during the call, suggesting focus on growth pace and mix normalization into 2025 .

What Went Well and What Went Wrong

What Went Well

Transit segment delivered higher sales (+7.1%) and adjusted operating margin (16.4%, +150 bps), driven by favorable product mix and Integration 2.0 savings .
Record cash generation: quarterly cash from operations $723M (cash conversion 212%) and full-year cash from operations $1.83B (117% conversion) .
Robust orders and backlog: Q4 orders included >$1B in new locomotives and mods; 12-month backlog rose to $7.681B (+3% YoY; +5.5% ex-FX) providing strong visibility .
Management quote: “Our Board…approved a 25% increase in our quarterly dividend, and in December, increased our share buyback authorization by $1.0 billion” — highlighting capital returns and confidence .

What Went Wrong

Adjusted operating margin was slightly lower YoY (16.9% vs 17.0%) as mix (services down, equipment up) and higher SG&A offset gross margin gains; GAAP other income also fell vs last year .
Digital Intelligence sales declined 1.4% YoY in Q4 on North America softness (discretionary OpEx and commuter signaling), partially offset by international strength in PTC/onboard products/mining tech .
Industry headwinds: North American railcar build expected down ~17% in 2025; active locomotive fleet largely flat despite higher carloads, limiting near-term services momentum .

Financial Results

Metric	Q4 2023	Q2 2024	Q3 2024	Q4 2024
Net Sales ($USD Billions)	$2.526	$2.64	$2.66	$2.583
GAAP Gross Margin %	30.3%	33.1%	33.0%	30.9%
Adjusted Gross Margin %	30.8%	—	—	31.6%
GAAP Operating Margin %	12.2%	16.3%	16.3%	12.9%
Adjusted Operating Margin %	17.0%	19.3%	19.7%	16.9%
GAAP Diluted EPS ($)	$1.20	$1.64	$1.63	$1.23
Adjusted Diluted EPS ($)	$1.54	$1.96	$2.00	$1.68
Cash from Operations ($USD Millions)	$686	$235	$542	$723

Segment performance (Q4 2024 vs Q4 2023):

Segment Metric	Q4 2023	Q4 2024
Freight Net Sales ($USD Millions)	$1,789	$1,794
Freight GAAP Operating Margin %	13.6%	15.2%
Freight Adjusted Operating Margin %	19.3%	19.4%
Transit Net Sales ($USD Millions)	$737	$789
Transit GAAP Operating Margin %	11.9%	13.0%
Transit Adjusted Operating Margin %	14.9%	16.4%

Product line breakdown (Q4):

Product Line	Q4 2023 ($M)	Q4 2024 ($M)
Freight Services	958	806
Freight Equipment	352	499
Freight Components	269	282
Freight Digital Intelligence	210	207
Transit OEM	333	339
Transit Aftermarket	404	450

KPIs and balance sheet highlights:

KPI	Value
12-Month Backlog ($B)	$7.681 (+3.0% YoY; +5.5% ex-FX)
Total Backlog ($B)	$22.272 (+1.2% YoY; +3.6% ex-FX)
Liquidity ($B)	$2.21 (cash + $1.50B undrawn)
Cash & Equivalents ($M)	$715
Total Debt ($B)	$3.98
Net Debt Leverage	~1.5x at Q4 end
Share Repurchases ($M)	$123 in Q4; $1.10B FY24
Dividend	$0.25/share declared; +25% QoQ
Cash Conversion	212% in Q4; 117% FY24

Non-GAAP reconciliation (Q4 2024 EPS bridge):

Item	EPS Impact
GAAP Diluted EPS	$1.23
+ Restructuring & Portfolio Optimization	$0.14
+ Non-cash Amortization	$0.31
Adjusted Diluted EPS	$1.68

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales ($B)	FY 2025	N/A (first issuance)	$10.725–$11.025	New
Adjusted EPS ($)	FY 2025	N/A (first issuance)	$8.35–$8.75 (mid +13%)	New
Operating Cash Flow Conversion	FY 2025	>90%	>90%	Maintained
Long-term Adjusted Op Margin Expansion	2025–2029	Prior 5-yr midpoint ~275 bps (achieved in 3 yrs)	350+ bps	Raised
Long-term EPS CAGR	2025–2029	Double-digit	Double-digit	Maintained
Long-term Revenue CAGR	2025–2029	Mid-single digit	Mid-single digit	Maintained
Dividend	Ongoing	Prior quarterly rate	$0.25/share (+25%)	Raised
Share Repurchase Authorization	Ongoing	Prior authorization	+$1.0B added in Dec	Increased

Note: Evident Inspection Technologies acquisition guidance excluded; management expects to update after close (H1 2025). 2024 revenue ~$433M and EBITDA ~$112M at Evident; deal slightly accretive to adjusted EPS in year 1; purchase price $1.78B (~12.0x 2025E EBITDA incl. synergies and tax benefits) .

Earnings Call Themes & Trends

Topic	Q2 2024 (Previous)	Q3 2024 (Previous)	Q4 2024 (Current)	Trend
Mix cadence (equipment vs services)	Equipment +36%, services +2%; level-loading to temper H2 margins	Services +16.5%, equipment −17.3%; warned Q4 mix headwind	Services down, equipment up; adjusted margin flat YoY; expect Q1 margin “pop back”	Mix normalized; near-term margin headwind easing
Digital Intelligence	International growth; NA softness; +2% sales	+12.7% on international PTC/onboard/mining	−1.4% on NA softness; strong orders (~$1B FY)	International strength; NA recovery pending
International locomotives	Large Tier 4 NA order added to backlog; Pakistan mods; Brazil service	Kazakhstan $405M added; pipeline strongest in 5 years	$649M new international loco orders; Africa Simandou project >$1B opportunity	Robust multi-year visibility
Transit profitability	Adjusted margin 12.7% (+160 bps)	Adjusted margin 12.8% (+30 bps)	Adjusted margin 16.4% (+150 bps) on mix and Integration 2.0 savings	Improving margin trajectory
Regulatory/macro	Chevron ruling implications on EPA/CARB; customer behavior unchanged	EPA heavy truck framework supportive of Wabtec fuel-agnostic engines	FRA waiver progress for air brake control; tariffs fluid; not in guidance	Gradual regulatory tailwinds; tariffs monitored
Integration & portfolio	Integration 2.0 savings ahead; portfolio pruning to lift margins	Integration 2.0 tempering H2; portfolio optimization execution	Launching Integration 3.0, $100–$125M run-rate savings by 2028; continued pruning	Structural margin levers expanding

Management Commentary

“The Wabtec team delivered a strong 2024… higher orders, sales, margin expansion, increased earnings and robust cash flow.” — Rafael Santana, CEO .
“We remain committed to… maximize shareholder returns… returned $1.2 billion to shareholders… Board… increased our quarterly dividend by 25% and… share buyback authorization by $1.0 billion.” — Rafael Santana .
“We expect 2025 sales of between $10.7 billion to $11 billion… adjusted EPS… $8.35 to $8.75… cash flow conversion… greater than 90%.” — Rafael Santana .
“Integration 3.0… simplifying, streamlining and consolidating… deliver $100–$125M of additional run-rate savings by 2028.” — Rafael Santana .

Q&A Highlights

Margin cadence and mix: Management emphasized Q4 mix headwinds (equipment up, services down) were expected and guided margins to rise sequentially into Q1 2025 as level-loading benefits accrue .
Backlog coverage: ~72% of 12-month backlog set in orders; guidance implies ~5% revenue growth midpoint despite flow-business variability (railcar builds down) .
Digital Intelligence outlook: NA softness tied to discretionary OpEx and commuter signaling; strong international demand (PTC/onboard/mining) and recurring revenue focus; FRA waiver progress supportive of next-gen automation .
New locos vs mods: Combined North America demand growing high-single-digits into 2025; EVO modernization targeted to deliver up to ~7% fuel savings, driving customer ROI .
Evident acquisition: Excluded from 2025 guidance; expected slight EPS accretion in year one; doubles Digital TAM from ~$8B to ~$16B, 68% recurring revenue base .

Estimates Context

S&P Global consensus estimates for Q4 2024 EPS and revenue were not retrievable at request time due to provider rate limits; therefore, direct comparison to Street consensus is unavailable. The absence of consensus data may impede immediate recalibration of near-term estimate trajectories. (Values would normally be retrieved from S&P Global.)

Key Takeaways for Investors

Near-term margin cadence reflects planned mix normalization; expect sequential margin improvement from Q4 to Q1 2025 as level-loading and productivity gains show through .
Transit margin expansion is durable, supported by Integration 2.0 and selective order intake; mixed demand and favorable aftermarket skew should sustain mid-teens profile .
International locomotives and services underpin multi-year visibility; Africa (Simandou) and Kazakhstan wins add depth to backlog, offsetting North America variability .
2025 guidance signals confidence: adjusted EPS midpoint +13% with >90% cash conversion; long-term plan raises margin expansion target to 350+ bps, supported by Integration 3.0 .
Capital returns remain a tailwind: 25% dividend increase and $1B buyback authorization, plus FY24 repurchases of $1.10B, support per-share compounding .
Digital Intelligence portfolio is strategically expanding; Evident acquisition (H1 close expected) slightly accretive in year one, increases recurring exposure and TAM to ~$16B .
Trading implications: The ~8% intra-day drawdown on the call suggests sensitivity to moderated revenue growth vs strong recent quarters; watch for Q1 margin “pop back,” backlog conversion, and any update post-Evident close as potential positive catalysts .

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORP (WAB)·Q4 2024 Earnings Summary