Stock Analysis | Westinghouse Air Brake Outlook - A Mixed Picture with Technical Caution

Market Snapshot

Takeaway: Westinghouse Air Brake (WAB) is showing a mixed market profile, with a weak technical outlook but some positive underlying fundamentals. Investors are advised to tread carefully due to the current bearish momentum.

News Highlights

Recent news suggests cautious optimism for the broader industrial and machinery sectors, with developments in Brazil and India pointing to potential recovery. Here are a few highlights:

• Farm Machinery Recovery: Sales in the Brazilian farm machinery sector stabilized in November 2024 and grew by 12% through February 2025, indicating a modest recovery. This could bode well for WAB, which operates in related industrial segments.
• Focus on Indigenous Processing Machinery: An Indian government official emphasized the need to reduce dependency on imported food processing machinery, which could create opportunities for domestic manufacturers and suppliers like WAB.
• Changes in U.S. Vaccine Policy: Although not directly linked to WAB, the shift in U.S. vaccine policy under HHS Secretary Robert F. Kennedy Jr. may reflect broader regulatory shifts that could impact manufacturing sectors in the long term.

Analyst Views & Fundamentals

The analyst consensus for WAB remains split. Three analysts from three institutions have issued ratings in the last 20 days, ranging from "Strong Buy" to "Neutral," indicating a lack of consensus.

• Susquehanna (Bascome Majors): A "Strong Buy" with a historical win rate of 75%. This is the strongest endorsement among the recent analysts.
• Morgan Stanley (Dillon Cumming): A "Buy" with a poor historical win rate of 0%, signaling caution.
• JP Morgan (Tami Zakaria): A "Neutral" rating, with a 33.3% win rate.

The simple average rating is 4.00, while the weighted rating (factoring in historical performance) is 2.47. This suggests a gap between the average and performance-weighted ratings, reflecting the analysts' mixed track records.

On the fundamental side, WAB shows mixed signals. Key factors include:

• EV/EBIT: 38.11 times, with a internal diagnostic score of 3.
• PE Ratio: 55.01 times, with a internal diagnostic score of 2.
• Net Profit Growth: 17.29%, with a internal diagnostic score of 2.
• Basic EPS Growth: 20.75%, with a internal diagnostic score of 2.
• Cash-MV: -0.59 (negative cash flow), with a internal diagnostic score of 3.

While earnings and profit growth are positive, the high multiples and weak cash flow present a complex picture. These fundamentals are somewhat at odds with the weak technical outlook, suggesting potential short-term caution despite stronger underlying business momentum.

Money-Flow Trends

Big money is moving out, as the fund-flow score of 7.79 (good) suggests. The overall inflow ratio is 0.497, which is slightly negative. Large investors (Extra-large, Large, and Medium) are showing a negative trend, while small investors have a negative trend as well. This indicates that institutional and retail investors are both cautious about the stock at the moment.

Key Technical Signals

From a technical perspective, WAB is in a weak state, with the technical score at 3.05, suggesting it is best avoided. Here are the key indicators and their internal scores:

• MACD Golden Cross: A bullish signal with an internal diagnostic score of 8.22. This is one of the few positive signals.
• Ex-Dividend Date: Bearish with a internal diagnostic score of 1.
• Dividend Payable Date: Bearish with a internal diagnostic score of 1.21.
• Dividend Record Date: Bearish with a internal diagnostic score of 1.
• WR Overbought: Neutral with a internal diagnostic score of 3.68.
• WR Oversold: Neutral with a internal diagnostic score of 3.17.

In the last five days, the most notable chart patterns include:

• August 13: WR Overbought and MACD Golden Cross.
• August 14: Ex-Dividend Date and Dividend Record Date.
• August 28: Dividend Payable Date.
• August 7: WR Oversold.

The technical outlook remains bearish due to the dominance of negative signals (5 bearish vs. 1 bullish). Momentum is weak, and the trend is unclear, making it a high-risk play at the moment.

Conclusion

Despite some positive fundamental factors such as strong earnings growth and decent historical analyst ratings, WAB is caught in a bearish technical environment. With 5 bearish signals versus just 1 bullish one and an overall internal technical score of 3.05, the stock is best avoided for now.

Actionable Takeaway: Consider waiting for a clearer trend to emerge or look for a potential pull-back after the recent volatility around dividend dates. Investors may want to monitor the company’s next earnings report and the reaction from analysts to assess whether the positive fundamentals can overcome the current technical headwinds.