Negative Investor Sentiment On Wabtec Leads Deutsche Bank To A New Buy Rating

The brokerage believes the Wabtec story is not understood properly in the SMID machinery segment. This is mainly because the company faced a number of headwinds since late 2015 thus pressuring the stock in the last one-year period.

The analyst sees the company gaining from organic uptick next year, citing increased freight aftermarket, favorable train control revenues and transit. Aside from that, Deutsche Bank expects favorable earnings revisions supported the price objective.

Related Link: Wabtec Reports Purchase Of Gerken Group, No Terms Disclosed

In a research note to clients, the analyst said, "Organic revenue growth will rebound in 2017 Higher US carload volumes should drive freight aftermarket demand in 2017, which we believe will offset the expected weakness in original equipment. We are also forecasting stronger transit sales from increased US government funding under the FAST Act and international project wins."

The brokerage pointed out 2018 implementation deadline for operators and that would be a gain for Wabtec to grow revenue in 2017–2018.

Deutsche Bank sees the Faiveley acquisition creating one of the biggest public rail equipment providers and expects pro forma sales of approximately $4.4 billion, thus creating a strong international presence. That will help 50 percent of sales from outside North America apart from exposing more to transit markets.

At time of writing, shares were up 1.45 percent on the day, trading at $78.10.

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