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Freight rail products company $WAB said its MotivePower subsidiary delivered a prototype locomotive, certified to meet the new Tier 4 emissions standards, to Metrolinx. MotivePower also signed a $97MM contract with Metrolinx to build 16 Tier 4 locomotives based on a similar platform and include AC propulsion. Delivery is expected to begin in 2017.
$WAB acquired Melett Ltd., a manufacturer of high-quality turbochargers and replacement parts. With operations in the UK, Europe, North America and China, Melett provides turbochargers and repair parts to automotive turbocharger reconditioning and remanufacturing customers in more than 100 countries around the world.
$WAB signed a contract worth about $40MM to design, install, test and commission Positive Train Control (PTC) for the South Florida Regional Transportation Authority (SFRTA), which operates the Tri-Rail commuter rail service. Installation is expected to be completed by the end of 2018.
$WAB signed a $97MM contract to provide signaling and communication services, including a control and command center, for TEX Rail, a new commuter rail line being developed by the Fort Worth Transportation Authority. The authority expects to open the 27-mile, double-track line in 2018.
$WAB now expects 2016 revenue to be down about 10% to about $2.95Bil and its GAAP EPS of $3.45-3.50. $WAB lowered its adjusted EPS outlook to $3.95-4.00 from $4.00-4.20. For 2017, $WAB expects revenue of about $4.2Bil, adjusted operating margin of about 15-16% and adjusted earnings to be about 8% higher than 2016.
$WAB acquired majority ownership of Faiveley Transport. Through tender offer, shareholders of Faiveley will have option to elect to receive EUR 100 per share of Faiveley in cash or 1.1538 $WAB common shares per Faiveley share. The total purchase price for 100% of Faiveley shares is about $1.7Bil, including assumed debt and net of cash acquired.
$WAB acquired majority ownership of Faiveley Transport after completing the purchase of the Faiveley family's stake, which represented about 51% of shares outstanding, for $212MM in cash and 6.3MM common shares of $WAB. $WAB plans to launch a tender offer for the remaining public shares in December.
$WAB said it has acquired Gerken Group SA, a leading manufacturer of specialty carbon and graphite products for rail and other industrial applications. The company has annual sales of about $40MM. Gerken's sales are mainly in the aftermarket and outside of North America.
KeyBanc analyst Steve Barger questions $WAB on cost control, asking where the company will go in future. Executive Chairman Albert Neupaver says that every year, poorly performing businesses have contingency plans that are in phases. So, $WAB is taking actions in cutting hedge and increasing activity related to performance system.
Longbow Research analyst Matthew Brooklier questions $WAB whether the decline in Freight revenue guidance of $200MM is within the railcar and locomotive side of business. Executive Chairman Albert Neupaver says that the $200MM includes the whole headwind from the Freight market and also the impact on the aftermarket business.
Stephens analyst Justin Long questions $WAB about its potential to grow organically in 2017. CFO Patrick Dugan says that the company is focused on PTC where the spending will continue. $WAB will see growth in the applications of enhancements once the computer is on board the locomotive, and international opportunities will be seen in train control.