KeyBanc Downgrades Westinghouse Air Brake, Says Forecast Is A 'Rough Estimate'

Westinghouse Air Brake Technologies Corp WAB shares recently hit KeyBanc Capital Market's $113 price target, prompting the sell-side firm revisit its stance on the stock. 

The Analyst

Analyst Steve Barger downgraded Westinghouse Air Brake from Overweight to Sector Weight.

The Thesis

Westinghouse Air Brake's revenue, EBIT and EBITDA forecast through 2022 seems aspirational, especially for the outyears, Barger said in a Thursday note. (See the analyst's track record here.) 

The company's model "is more of a rough estimate than we prefer," the analyst said. 

Applying a P/E multiple of 18-20 times to the model and discounting that back at 9 percent leads to an implied price of about $110 per share, in-line with the current level, Barger said. 

Given the macro, forecasting and GET integration risks, the analyst said that if his pro forma estimate proves fairly accurate, then Westinghouse stock is fairly reflecting the positive and negative aspects of the company's story. 

"The positives, in our view, include cycle improvement and what should be long-term value creation from the combined WAB/GET platform," the firm said.

Cycle concerns, integration issues and the outlook falling below consensus are downside risks for Westinghouse shares, Barger said. 

Investors with a lower cost-base should not feel compelled to reduce their position, he said. 

The Price Action

Westinghouse Air Brake shares were trading down more than 1 percent to $109.45 at the time of publication Friday. 

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