Wabtec (NYSE:WAB) executives said the company exited fiscal 2025 with strong order momentum, a larger backlog, and higher profitability, while also outlining a 2026 outlook that incorporates recent acquisitions and expects continued earnings growth.
Fourth-quarter results and cash flow outperformance
President and CEO Rafael Santana described 2025 as an “outstanding year,” citing 7.5% top-line growth and nearly 19% growth in adjusted earnings per share for the full year. In the fourth quarter, Wabtec reported sales of roughly $3.0 billion, up about 15% year over year, and adjusted EPS of $2.10, up 25%.
Olin noted that operating margins were lower than planned due to higher compensation expense tied to the company’s strong cash performance. He said the fourth quarter included a higher-than-expected compensation accrual connected to incentive programs linked to cash conversion.
Backlog growth and order activity
Management emphasized backlog expansion as a key driver of visibility. Santana said the company ended the year with a 12-month backlog of $8.2 billion, up 7% from the prior year, while multi-year backlog surpassed $27 billion, up 23%.
In freight, Olin said the segment’s 12-month backlog was $6.02 billion (up 8%), while multi-year backlog reached $22.49 billion (up 25.1%). In transit, he reported a 12-month backlog of $2.21 billion (up 5.1%) and multi-year backlog up 14.7%.
During the quarter, Santana said Wabtec converted more than $2 billion of pipeline into new locomotive and modernization orders for North American customers. In the Q&A, executives clarified that orders signed and announced in the quarter were already reflected in backlog, while opportunities described as pipeline would enter backlog upon conversion to orders.
Segment performance and mix dynamics
Fourth-quarter sales were $2.97 billion, up 14.8% year over year, with growth in both freight and transit. Olin said results included strong organic growth, catch-up on locomotive deliveries that shifted from the second quarter due to a supplied-part issue, and acquisition-driven growth in Inspection Technologies that exceeded the acquisition plan. Excluding currency, fourth-quarter sales rose 13.2%.
Profitability improved on an adjusted basis. GAAP operating income was $356 million, while adjusted operating margin was 17.7%, up 0.8 percentage points from the prior-year quarter, driven by a 2.1 percentage point improvement in adjusted gross margin. GAAP EPS was $1.18, down 4.1% year over year, which management attributed in part to net pre-tax charges of $55 million related to restructuring and transaction costs.
- Freight: Sales increased 18.3%. Adjusted operating income rose 35.1% to $470 million, and adjusted operating margin improved 2.7 points to 22.1%. GAAP results included $50 million of restructuring and portfolio optimization charges as well as purchase accounting impacts from acquisitions.
- Transit: Sales increased 6.7% to $842 million (2% growth excluding currency). Adjusted operating income was $118 million, and adjusted margin was 14.0%, down 2.4 points year over year due to higher operating expenses as a percentage of revenue.
By product line, equipment sales rose 33.5% in the quarter, while services revenue fell 5% due to the timing of modernization deliveries. Olin said the mix shift—equipment up and services down—was consistent with what the company had discussed earlier in the year.
Markets, modernizations, and tariffs
On market conditions, Santana said North American carload traffic was flat in the quarter, leading to fewer active locomotives, though locomotives in service ran at higher intensity. Internationally, he said carloads continued to grow in markets including Latin America, Africa, India, and Asia, supported by infrastructure investment.
Management also highlighted pressure in the North American railcar build environment. Santana said 2025 railcar builds were approximately 31,000 cars, and the 2026 industry outlook was 24,000 cars, down 22% versus 2025.
Modernization remains a central theme. Santana said more than 25% of active North American locomotives are over 20 years old and 25% still run on DC technology, framing fleet renewal as “not discretionary.” He also said Wabtec will launch its first EVO Modernization program in 2026 for Evolution Series locomotives first introduced in 2005. The company said the EVO modernization is expected to deliver more than 20% improvement in reliability and tractive effort by replacing DC traction motors and upgrading electronics and controls, with EVO Advantage expected to drive up to 7% fuel savings.
Tariffs were discussed as a headwind. Olin said tariff costs increased meaningfully from the third quarter to the fourth and are expected to continue affecting results into 2026, particularly in the first half, as costs move through inventory into the income statement. Executives said the company is working mitigation actions including exemptions, supply chain changes, sharing costs with customers, and broader cost management.
Capital allocation, acquisitions, and 2026 guidance
Wabtec’s board increased the dividend by 24% and raised the company’s share repurchase authorization to $1.2 billion, management said. In 2025, the company repurchased nearly $223 million of shares and paid $173 million in dividends.
On acquisitions, Santana said the company closed the Frauscher Sensor Technology acquisition in early December and closed the Dellner Couplers acquisition “yesterday.” Olin said net debt leverage ended the fourth quarter at 1.9x after funding Frauscher for approximately $765 million, and management said leverage remained within its stated range after Dellner closed. Santana added that acquisitions since 2019 were reviewed at a recent board meeting and were said to be ahead of pro forma expectations, with strong early performance cited for 2025 deals.
Looking ahead, Wabtec guided for 2026 sales of $12.2 billion to $12.5 billion and adjusted EPS of $10.05 to $10.45, which management said implies 10.5% sales growth and 14% adjusted EPS growth at the midpoint and includes the Dellner acquisition. The company also said it will continue to provide long-term cash guidance beginning in 2026 but will no longer provide annual cash conversion guidance, with executives reiterating a long-term focus on sustaining cash conversion above 90%.
About Wabtec (NYSE:WAB)
Wabtec Corporation (Westinghouse Air Brake Technologies Corporation) is a global provider of equipment, systems and services for the rail industry. The company supplies products and solutions to freight railroads, transit agencies and other industrial operators, focusing on technologies that improve the performance, safety and efficiency of locomotives and rail networks. Wabtec’s business spans new equipment manufacturing, aftermarket parts and services, and digital and control systems for rail operations.
Product and service offerings include locomotive systems and components, braking and air systems, propulsion and traction equipment, signaling and control technologies, and a range of aftermarket services such as maintenance, remanufacturing, parts distribution and fleet modernization.
