Wabtec Corporation - Westinghouse Air Brake Technologies Corporation
10/21/2026 | Press release | Distributed by Public on 10/21/2026 08:13
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information in the unaudited condensed consolidated financial statements and notes thereto included herein and Westinghouse Air Brake Technologies Corporation's Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included in its Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission on February 13, 2026.
OVERVIEW
Wabtec is a global provider of value-added, technology-based locomotives, equipment, systems, and services for the freight rail and passenger transit industries, as well as the mining, marine and industrial markets and applications. Our highly engineered rail and transit products, which are designed to enhance safety, improve productivity and reduce maintenance costs for customers, can be found on most locomotives, freight cars, passenger transit cars and buses around the world. Our core products and services are essential in the safe and efficient operation of freight rail and passenger transit vehicles. Wabtec is a global company with operations in over 50 countries and our products can be found in more than 100 countries worldwide. In the first nine months of 2026, approximately half of the Company's net sales were generated from customers outside the United States.
Business Update
During the first quarter of 2025, Wabtec announced a definitive agreement to acquire Dellner Couplers, a global leader in highly engineered safety-critical train connection systems and services for passenger rail rolling stock. The acquisition subsequently closed on February 10, 2026 for approximately $1.053 billion and is included within our Transit Segment.
Total multi-year backlog increased $4.0 billion during the first nine months of 2026 to a record $31.4 billion at September 30, 2026. Significant Freight orders during the first nine months of 2026 included international orders spanning new locomotives, components, digital solutions, and multi-year services, including a multi-year service agreement supporting the Simandou mining project. Other significant Freight orders included a multi-year, multi-billion-dollar mining contract for drive systems and aftermarket parts, new locomotive and modernization orders in North America across multiple Class 1 customers, an international Positive Train Control (PTC) order, and a mining drive systems order in the Asia-Pacific region. We also began executing the first EVO modernization build to support the commercial rollout to the installed base. In Transit during the first nine months of 2026, we were awarded several significant orders across multiple key customers in brakes, couplers, and platform doors.
Wabtec is focused on driving operational efficiency and improving profitability while reducing manufacturing complexity. As a result, there are restructuring initiatives, including Integration 3.0, Portfolio Optimization and Integration 2.0, aimed at achieving these focus areas. During the first nine months of 2026 and 2025, Wabtec incurred $10 million and $21 million, respectively, of restructuring costs primarily for employee-related costs on programs under these initiatives. In addition, Transaction costs incurred during the nine months ended September 30, 2026 and 2025 related to recent acquisitions were approximately $14 million and $44 million, respectively.
Future macroeconomic volatility, changes to tariffs and trade policies, impacts from regional conflicts and war, supply chain disruptions, and labor availability, amongst other things, could cause a negative impact on revenue and cost increases resulting in an adverse effect on the Company's operating results. Additionally, broad-based inflation, metals, energy and other commodity costs, transportation and logistics costs, labor costs, and foreign currency exchange rate fluctuations all continue to impact our results. The Company utilizes various mitigating actions intended to lessen the impact of macroeconomic volatility, including the impact of current tariffs. These actions include implementing price escalations and surcharges, driving operational efficiencies through various cost mitigation efforts and discretionary spend management, strategically sourcing materials, reviewing and modifying distribution logistics, and accelerating integration synergies through our strategic initiatives. The Company has experienced increased tariff costs which have unfavorably impacted our operating results and cash from operations for the nine months ended September 30, 2026. Although a nominal amount of these costs has been recovered through tariff refunds and the Company continues to pursue additional refund claims, the net impact of tariffs and timing of refunds on the Company's results of operations and cash flows remains subject to uncertainty.
RESULTS OF OPERATIONS
Consolidated Results
THIRD QUARTER 2026 COMPARED TO THIRD QUARTER 2025
The following table shows our Condensed Consolidated Statements of Operations for the periods indicated.
|
Three Months Ended September 30, |
|||||||||||
| In millions | 2026 | 2025 | |||||||||
| Net sales: | |||||||||||
| Sales of goods | $ | 2,627 | $ | 2,425 | |||||||
| Sales of services | 493 | 461 | |||||||||
| Total Net sales | 3,120 | 2,886 | |||||||||
| Cost of sales: | |||||||||||
| Cost of goods | (1,664) | (1,617) | |||||||||
| Cost of services | (292) | (267) | |||||||||
| Total Cost of sales | (1,956) | (1,884) | |||||||||
| Gross profit | 1,164 | 1,002 | |||||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative expenses | (383) | (375) | |||||||||
| Engineering expenses | (67) | (59) | |||||||||
| Amortization expense | (89) | (77) | |||||||||
| Total Operating expenses | (539) | (511) | |||||||||
| Income from operations | 625 | 491 | |||||||||
| Other income and expenses: | |||||||||||
| Interest expense, net | (80) | (65) | |||||||||
| Other income (expense), net | 12 | (1) | |||||||||
| Income before income taxes | 557 | 425 | |||||||||
| Income tax expense | (146) | (112) | |||||||||
| Net income | 411 | 313 | |||||||||
| Less: Net income attributable to noncontrolling interest | (2) | (3) | |||||||||
| Net income attributable to Wabtec shareholders | $ | 409 | $ | 310 | |||||||
The following table shows the major components of the change in Net sales in the three months ended September 30, 2026 from the three months ended September 30, 2025:
| In millions | Freight Segment | Transit Segment | Total | ||||||||||||||
| Third Quarter 2025 Net sales | $ | 2,093 | $ | 793 | $ | 2,886 | |||||||||||
| Acquisitions | 49 | 65 | 114 | ||||||||||||||
| Portfolio Optimization (Divestitures/Exits) | (11) | (1) | (12) | ||||||||||||||
| Foreign Exchange | 4 | (9) | (5) | ||||||||||||||
| Organic | 102 | 35 | 137 | ||||||||||||||
| Third Quarter 2026 Net sales | $ | 2,237 | $ | 883 | $ | 3,120 | |||||||||||
Net sales
Net sales for the three months ended September 30, 2026 increased by $234 million, or 8.1%, to $3.12 billion compared to the same period in 2025. Organic sales increased $137 million, or 4.7%, which was attributable to both the Freight and Transit Segments. Freight sales increased primarily due to higher deliveries of locomotive modernizations, higher core services sales, strong industrial and maintenance of way demand, higher sales of asset inspection products and higher mining sales, partially offset by lower locomotive deliveries. Transit sales increased from higher demand for Aftermarket and Original Equipment Manufacturing products and services driven by increased investments in sustainable infrastructure, fleet expansion and renewals and increased passenger ridership levels. Acquisitions increased Net sales by $114 million, or 4.0%, and unfavorable changes in foreign exchange decreased Net sales by $5 million, or 0.2%.
Cost of sales
Cost of sales for the three months ended September 30, 2026 increased by $72 million, or 3.8%, to $1.96 billion compared to the same period in 2025. The increase is primarily due to the increase in Net sales. Cost of sales as a percentage of Net sales was 62.7% and 65.3% for the three months ended September 30, 2026 and 2025, respectively. The improvement in gross margin is attributable to productivity and efficiency, favorable mix within both the Freight and Transit segments, savings from integration and other restructuring initiatives and accretion from recent acquisitions, partially offset by higher commodity costs and net tariffs. Cost of sales for the three months ended September 30, 2025 included $24 million of costs related to purchase price accounting for the step-up of inventory to fair value related to acquisitions. Cost of sales for the three months ended September 30, 2026 and 2025 both included $2 million of costs related to restructuring initiatives.
Operating expenses
Total operating expenses increased $28 million, or 5.5%, for the three months ended September 30, 2026 compared to the same period in 2025. Selling, general and administrative expenses ("SG&A") increased $8 million for the three months ended September 30, 2026 compared to the same period in 2025. The increase is primarily due to incremental expense from acquisitions, partially offset by lower transaction costs and the impacts of integration and other restructuring initiatives. Transaction costs associated with acquisitions included in SG&A were $9 million for the three months ended September 30, 2025. SG&A for the three months ended September 30, 2025 included $4 million of costs related to restructuring initiatives. Engineering expenses increased $8 million and Amortization expense increased $12 million, both due to incremental expense from acquisitions.
Interest expense, net
Interest expense, net, increased $15 million to $80 million for the three months ended September 30, 2026 compared to the same period in 2025, due to higher average overall debt balances in the current period, primarily related to acquisitions.
Other income (expense), net
Other income (expense), net increased $13 million for the three months ended September 30, 2026 compared to the same period in 2025, primarily due to foreign exchange gains in the current period.
Income taxes
The effective income tax rate of 26.3% for the three months ended September 30, 2026 was mostly flat compared to 26.4% for the three months ended September 30, 2025.
Freight Segment
The following table shows our Condensed Consolidated Statements of Operations for our Freight Segment for the periods indicated:
|
Three Months Ended September 30, |
|||||||||||||||||||||||
| In millions | 2026 | 2025 | Change | % Change | |||||||||||||||||||
| Net sales: | |||||||||||||||||||||||
| Sales of goods | $ | 1,746 | $ | 1,634 | $ | 112 | 6.9 | % | |||||||||||||||
| Sales of services | 491 | 459 | 32 | 7.0 | % | ||||||||||||||||||
| Total Net sales | 2,237 | 2,093 | 144 | 6.9 | % | ||||||||||||||||||
| Cost of sales: | |||||||||||||||||||||||
| Cost of goods | (1,085) | (1,077) | 8 | 0.7 | % | ||||||||||||||||||
| Cost of services | (291) | (266) | 25 | 9.4 | % | ||||||||||||||||||
| Total Cost of sales | (1,376) | (1,343) | 33 | 2.5 | % | ||||||||||||||||||
| Cost of sales (% of Net sales) | 61.5 | % | 64.2 | % | (2.7) | ||||||||||||||||||
| Gross profit | 861 | 750 | 111 | 14.8 | % | ||||||||||||||||||
| Operating expenses | (346) | (336) | 10 | 3.0 | % | ||||||||||||||||||
| Income from operations | $ | 515 | $ | 414 | $ | 101 | 24.4 | % | |||||||||||||||
| Income from operations (% of Net sales) | 23.0 | % | 19.8 | % | 3.2 | ||||||||||||||||||
The following table shows the major components of the change in Net sales for the Freight Segment in the third quarter of 2026 from the third quarter of 2025:
| In millions | |||||
| Third Quarter 2025 Net sales | $ | 2,093 | |||
| Acquisitions | 49 | ||||
| Portfolio Optimization (Divestitures/Exits) | (11) | ||||
| Foreign Exchange | 4 | ||||
| Organic changes in Net sales by Product Line: | |||||
| Equipment | 3 | ||||
| Services | 50 | ||||
| Digital Intelligence | 19 | ||||
| Components | 30 | ||||
| Third Quarter 2026 Net sales | $ | 2,237 | |||
Net sales
Freight Segment organic sales increased by $102 million, or 4.9%, driven primarily by Services sales from higher deliveries of locomotive modernizations and higher core services sales, Components sales from strong industrial, maintenance of way, and international demand, partially offset by lower North America railcar build, and Digital sales from higher demand for asset inspection products. Equipment sales also increased slightly from higher mining sales, mostly offset by lower locomotive deliveries. Acquisitions increased sales by $49 million, or 2.3%, primarily from Frauscher, and favorable changes in foreign exchange increased sales by $4 million, or 0.2%.
Cost of sales
Freight Segment Cost of sales increased $33 million, primarily due to higher sales volume, and Cost of sales as a percentage of Net sales decreased 2.7 percentage points. The improvement in gross margin is attributable to productivity and efficiency, favorable mix within the Freight Segment and accretion from recent acquisitions, partially offset by higher commodity costs and net tariffs which include nominal tariff recoveries. Cost of sales for the three months ended September 30, 2025 included $24 million of costs related to purchase price accounting for the step-up of inventory to fair value related to acquisitions.
Operating expenses
Freight Segment Operating expenses increased by $10 million, and Operating expenses as a percentage of Net sales decreased 0.5 percentage points. Freight Segment SG&A expenses decreased $3 million for the three months ended September 30, 2026. The decrease is primarily due to lower employee compensation and benefit costs, partially offset by incremental expense from acquisitions. Freight Segment Engineering expenses increased $10 million and Amortization expense increased $3 million both due to incremental expense from acquisitions.
Transit Segment
The following table shows our Condensed Consolidated Statements of Operations for our Transit Segment for the periods indicated:
|
Three Months Ended September 30, |
|||||||||||||||||||||||
| In millions | 2026 | 2025 | Change | % Change | |||||||||||||||||||
| Net sales | $ | 883 | $ | 793 | $ | 90 | 11.3 | % | |||||||||||||||
| Cost of sales | (580) | (541) | 39 | 7.2 | % | ||||||||||||||||||
| Cost of sales (% of Net sales) | 65.5 | % | 68.3 | % | (2.8) | ||||||||||||||||||
| Gross profit | 303 | 252 | 51 | 20.2 | % | ||||||||||||||||||
| Operating expenses | (158) | (137) | 21 | 15.3 | % | ||||||||||||||||||
| Income from operations | $ | 145 | $ | 115 | $ | 30 | 26.1 | % | |||||||||||||||
| Income from operations (% of Net sales) | 16.4 | % | 14.5 | % | 1.9 | ||||||||||||||||||
The following table shows the major components of the change in Net sales for the Transit Segment in the third quarter of 2026 from the third quarter of 2025:
| In millions | |||||
| Third Quarter 2025 Net sales | $ | 793 | |||
| Acquisitions | 65 | ||||
| Portfolio Optimization (Divestitures/Exits) | (1) | ||||
| Foreign Exchange | (9) | ||||
| Organic changes in Net sales by Product Line: | |||||
| Aftermarket | 24 | ||||
| Original Equipment Manufacturing | 11 | ||||
| Third Quarter 2026 Net sales | $ | 883 | |||
Net sales
Transit Segment organic sales increased by $35 million, or 4.4%, driven by strong Aftermarket and Original Equipment Manufacturing sales primarily as a result of increased pricing related to contract escalations and increased demand for products and services due to fleet expansion and renewals, increased passenger ridership levels and increased investments in sustainable infrastructure. Sales from the Dellner Couplers acquisition increased sales by $65 million, or 8.2%, and unfavorable changes in foreign exchange rates decreased sales by $9 million, or 1.1%.
Cost of sales
Transit Segment Cost of sales increased by $39 million, primarily due to higher sales volume and acquisitions, and Cost of sales as a percentage of Net sales decreased by 2.8 percentage points. The increase in gross margin was attributable to increased productivity, favorable pricing and mix within the Transit Segment and savings from integration and other restructuring initiatives.
Operating expenses
Transit Segment Operating expenses increased by $21 million and as a percentage of Net sales increased by 0.9 percentage points. Transit Segment SG&A expenses increased $14 million, Engineering expenses decreased $2 million and Amortization expense increased $9 million for the three months ended September 30, 2026, primarily due to incremental expense from acquisitions, partially offset by savings from integration and other restructuring initiatives. Transit SG&A expenses for the three months ended September 30, 2025 included $2 million of costs related to restructuring initiatives.
FIRST NINE MONTHS OF 2026 COMPARED TO FIRST NINE MONTHS OF 2025
The following table shows our Condensed Consolidated Statements of Operations for the periods indicated.
|
Nine Months Ended September 30, |
|||||||||||
| In millions | 2026 | 2025 | |||||||||
| Net sales: | |||||||||||
| Sales of goods | $ | 7,828 | $ | 6,808 | |||||||
| Sales of services | 1,421 | 1,394 | |||||||||
| Total Net sales | 9,249 | 8,202 | |||||||||
| Cost of sales: | |||||||||||
| Cost of goods | (4,990) | (4,548) | |||||||||
| Cost of services | (873) | (814) | |||||||||
| Total Cost of sales | (5,863) | (5,362) | |||||||||
| Gross profit | 3,386 | 2,840 | |||||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative expenses | (1,184) | (1,029) | |||||||||
| Engineering expenses | (193) | (155) | |||||||||
| Amortization expense | (267) | (219) | |||||||||
| Total Operating expenses | (1,644) | (1,403) | |||||||||
| Income from operations | 1,742 | 1,437 | |||||||||
| Other income and expenses: | |||||||||||
| Interest expense, net | (231) | (157) | |||||||||
| Other income, net | 33 | 21 | |||||||||
| Income before income taxes | 1,544 | 1,301 | |||||||||
| Income tax expense | (374) | (322) | |||||||||
| Net income | 1,170 | 979 | |||||||||
| Less: Net income attributable to noncontrolling interest | (4) | (11) | |||||||||
| Net income attributable to Wabtec shareholders | $ | 1,166 | $ | 968 | |||||||
The following table shows the major components of the change in Net sales in the nine months ended September 30, 2026 from the nine months ended September 30, 2025:
| In millions | Freight Segment | Transit Segment | Total | ||||||||||||||
| First Nine Months of 2025 Net sales | $ | 5,913 | $ | 2,289 | $ | 8,202 | |||||||||||
| Acquisitions | 396 | 175 | 571 | ||||||||||||||
| Portfolio Optimization (Divestitures/Exits) | (32) | (5) | (37) | ||||||||||||||
| Foreign Exchange | 38 | 49 | 87 | ||||||||||||||
| Organic | 280 | 146 | 426 | ||||||||||||||
| First Nine Months of 2026 Net sales | $ | 6,595 | $ | 2,654 | $ | 9,249 | |||||||||||
Net sales
Net sales for the nine months ended September 30, 2026 increased by $1,047 million, or 12.8%, to $9.25 billion compared to the same period in 2025. Organic sales increased $426 million, or 5.2%, which was attributable to both the Freight and Transit Segments. Freight sales increased primarily due to higher North American and international locomotive deliveries and higher mining sales, partially offset by lower deliveries of locomotive modernizations and engine overhauls. Transit sales increased from higher demand for Aftermarket and Original Equipment Manufacturing products and services driven by increased investments in sustainable infrastructure, fleet expansion and renewals and increased passenger ridership levels. Acquisitions increased Net sales by $571 million, or 7.0%, and favorable changes in foreign exchange rates increased Net sales by $87 million, or 1.1%.
Cost of sales
Cost of sales for the nine months ended September 30, 2026 increased by $501 million, or 9.3%, to $5.86 billion compared to the same period in 2025. The increase is primarily due to the increase in Net sales. Cost of sales as a percentage of Net sales was 63.4% and 65.4% for the nine months ended September 30, 2026 and 2025, respectively. The improvement in gross margin is attributable to productivity and efficiency, savings from integration and other restructuring initiatives, and accretion from recent acquisitions, partially offset by increases in net tariffs and commodity costs and unfavorable mix within the Freight Segment. Cost of sales for the nine months ended September 30, 2026 and 2025 included $28 million and $24 million, respectively, of costs related to purchase price accounting for the step-up of inventory to fair value related to acquisitions. Cost of sales for the nine months ended September 30, 2026 and 2025 included $5 million and $8 million, respectively, of costs related to restructuring initiatives.
Operating expenses
Total operating expenses increased $241 million, or 17.2%, for the nine months ended September 30, 2026 compared to the same period in 2025. SG&A expenses increased $155 million for the nine months ended September 30, 2026 compared to the same period in 2025. The increase is primarily due to incremental expense from acquisitions and higher employee compensation and benefit costs, partially offset by the impacts of integration and other restructuring initiatives. Transaction costs associated with acquisitions included in SG&A were $14 million and $44 million for the nine months ended September 30, 2026 and 2025, respectively. SG&A for the nine months ended September 30, 2026 and 2025 included $1 million and $12 million, respectively, of costs related to restructuring initiatives. Engineering expenses increased $38 million and Amortization expense increased $48 million both due to incremental expense from acquisitions.
Interest expense, net
Interest expense, net, increased $74 million to $231 million for the nine months ended September 30, 2026 compared to the same period in 2025, primarily due to higher average overall debt balances in the current period, primarily related to acquisitions.
Other income, net
Other income, net, increased $12 million to $33 million for the nine months ended September 30, 2026 compared to the same period in 2025, primarily due to foreign exchange gains in the current period, compared to foreign exchange losses in the prior period. This was partially offset by a $30 million net gain on mark-to-market derivatives in the prior period associated with the acquisitions of Dellner Couplers and Frauscher.
Income taxes
The effective income tax rate was 24.2% and 24.8% for the nine months ended September 30, 2026 and 2025, respectively. The year-over-year decrease in the effective rate was primarily driven by prior period audit settlements, higher discrete equity compensation tax deductions and the jurisdictional mix of earnings.
Freight Segment
The following table shows our Condensed Consolidated Statements of Operations for our Freight Segment for the periods indicated:
|
Nine Months Ended September 30, |
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| In millions | 2026 | 2025 | Change | % Change | |||||||||||||||||||
| Net sales: | |||||||||||||||||||||||
| Sales of goods | $ | 5,178 | $ | 4,524 | $ | 654 | 14.5 | % | |||||||||||||||
| Sales of services | 1,417 | 1,389 | 28 | 2.0 | % | ||||||||||||||||||
| Total Net sales | 6,595 | 5,913 | 682 | 11.5 | % | ||||||||||||||||||
| Cost of sales: | |||||||||||||||||||||||
| Cost of goods | (3,222) | (2,970) | 252 | 8.5 | % | ||||||||||||||||||
| Cost of services | (870) | (811) | 59 | 7.3 | % | ||||||||||||||||||
| Total Cost of sales | (4,092) | (3,781) | 311 | 8.2 | % | ||||||||||||||||||
| Cost of sales (% of Net sales) | 62.1 | % | 63.9 | % | (1.8) | ||||||||||||||||||
| Gross profit | 2,503 | 2,132 | 371 | 17.4 | % | ||||||||||||||||||
| Operating expenses | (1,034) | (883) | 151 | 17.1 | % | ||||||||||||||||||
| Income from operations | $ | 1,469 | $ | 1,249 | $ | 220 | 17.6 | % | |||||||||||||||
| Income from operations (% of Net sales) | 22.3 | % | 21.1 | % | 1.2 | ||||||||||||||||||
The following table shows the major components of the change in Net sales for the Freight Segment in the first nine months of 2026 from the first nine months of 2025:
| In millions | |||||
| First Nine Months of 2025 Net sales | $ | 5,913 | |||
| Acquisitions | 396 | ||||
| Portfolio Optimization (Divestitures/Exits) | (32) | ||||
| Foreign Exchange | 38 | ||||
| Organic changes in Net sales by Product Line: | |||||
| Equipment | 437 | ||||
| Services | (142) | ||||
| Components | 12 | ||||
| Digital Intelligence | (27) | ||||
| First Nine Months of 2026 Net sales | $ | 6,595 | |||
Net sales
Freight Segment organic sales increased by $280 million, or 4.7%, driven primarily by Equipment sales from higher North American and international locomotive deliveries and higher mining sales and Components sales from strong industrial demand, partially offset by lower North America railcar build. This was partially offset by decreased Services sales from lower deliveries of locomotive modernizations and engine overhauls and decreased Digital Intelligence sales driven by the exit of a low-margin project. Acquisitions increased sales by $396 million, or 6.7%, primarily from Inspection Technologies and Frauscher, and favorable changes in foreign exchange increased sales by $38 million, or 0.6%.
Cost of sales
Freight Segment Cost of sales increased by $311 million, primarily due to higher sales volume, and Cost of sales as a percentage of Net sales decreased 1.8 percentage points. The improvement in gross margin is attributable to productivity and efficiency and accretion from recent acquisitions, partially offset by higher commodity and net tariff costs, unfavorable mix within the Freight Segment and the exit of a low-margin Digital project. Cost of sales for the nine months ended September 30, 2026 and 2025 included $20 million and $24 million, respectively, of costs related to purchase price accounting for the step-up
of inventory to fair value related to acquisitions. Cost of sales for the nine months ended September 30, 2026 and 2025 included $2 million and $5 million, respectively, of costs related to restructuring initiatives.
Operating expenses
Freight Segment Operating expenses increased by $151 million, and Operating expenses as a percentage of Net sales increased 0.8 percentage points. Freight Segment SG&A expenses increased $90 million, Engineering expenses increased $34 million and Amortization expense increased $27 million for the nine months ended September 30, 2026, primarily due to incremental expense from acquisitions.
Transit Segment
The following table shows our Condensed Consolidated Statements of Operations for our Transit Segment for the periods indicated:
|
Nine Months Ended September 30, |
|||||||||||||||||||||||
| In millions | 2026 | 2025 | Change | % Change | |||||||||||||||||||
| Net sales | $ | 2,654 | $ | 2,289 | $ | 365 | 15.9 | % | |||||||||||||||
| Cost of sales | (1,771) | (1,581) | 190 | 12.0 | % | ||||||||||||||||||
| Cost of sales (% of Net sales) | 66.7 | % | 69.1 | % | (2.4) | ||||||||||||||||||
| Gross profit | 883 | 708 | 175 | 24.7 | % | ||||||||||||||||||
| Operating expenses | (471) | (394) | 77 | 19.5 | % | ||||||||||||||||||
| Income from operations | $ | 412 | $ | 314 | $ | 98 | 31.2 | % | |||||||||||||||
| Income from operations (% of Net sales) | 15.5 | % | 13.7 | % | 1.8 | ||||||||||||||||||
The following table shows the major components of the change in Net sales for the Transit Segment in the first nine months of 2026 from the first nine months of 2025:
| In millions | |||||
| First Nine Months of 2025 Net sales | $ | 2,289 | |||
| Acquisitions | 175 | ||||
| Portfolio Optimization (Divestitures/Exits) | (5) | ||||
| Foreign Exchange | 49 | ||||
| Organic changes in Net sales by Product Line: | |||||
| Aftermarket | 103 | ||||
| Original Equipment Manufacturing | 43 | ||||
| First Nine Months of 2026 Net sales | $ | 2,654 | |||
Net sales
Transit Segment organic sales increased by $146 million, or 6.4%, driven by strong Aftermarket and Original Equipment Manufacturing sales primarily as a result of increased demand for products and services due to fleet expansion and renewals, increased passenger ridership levels and increased investments in sustainable infrastructure. Sales from the Dellner Couplers acquisition increased sales by $175 million, or 7.6%, and favorable changes in foreign exchange rates increased sales by $49 million, or 2.1%.
Cost of sales
Transit Segment Cost of sales increased by $190 million, primarily due to higher sales volume, and Cost of sales as a percentage of Net sales decreased by 2.4 percentage points. The increase in gross margin was attributable to increased productivity, favorable mix within the Transit Segment and savings from integration and other restructuring initiatives. Cost of sales for the nine months ended September 30, 2026 included $8 million of costs related to purchase price accounting for the step-up of inventory related to acquisitions to fair value on the date of acquisition. Cost of sales for the nine months ended September 30, 2026 and 2025 both included $3 million of costs related to restructuring initiatives.
Operating expenses
Transit Segment Operating expenses increased by $77 million and as a percentage of Net sales increased by 0.6 percentage points. Higher SG&A expenses to support higher sales volume, higher employee compensation and benefit costs, and incremental Operating expenses from acquisitions were partially offset by savings from integration and other restructuring initiatives. Transit SG&A expenses for the nine months ended September 30, 2026 and 2025 included $1 million and $10 million, respectively, of costs related to restructuring initiatives.
Liquidity and Capital Resources
Liquidity is provided by operating cash flows, borrowings under our credit facilities, and proceeds from the Company's Senior Notes. Additionally, the Company utilizes the Revolving Receivables Program and supply chain financing program described below, as well as other short-term financing agreements with certain banks, for added flexibility as part of our liquidity management strategy. Subsequent to September 30, 2026, the Company established a commercial paper program under which it may issue up to $2.0 billion of unsecured short-term notes. The program is supported by the Company's existing Revolving Credit Facility and provides an additional source of liquidity but does not increase the Company's overall borrowing capacity. The following is a summary of selected cash flow information and other relevant data:
|
Nine Months Ended September 30, |
|||||||||||
| In millions | 2026 | 2025 | |||||||||
| Cash provided by (used for): | |||||||||||
| Operating activities | $ | 1,095 | $ | 767 | |||||||
| Investing activities | $ | (1,243) | $ | (1,887) | |||||||
| Financing activities | $ | (147) | $ | 907 | |||||||
Operating activities In the first nine months of 2026, cash provided by operating activities was $1,095 million compared to $767 million in the first nine months of 2025. The increase was driven by higher net income and decreased working capital requirements.
Net income was $1,170 million, an increase of $191 million compared to the prior year period. Non-cash adjustments, including depreciation and amortization of $424 million and stock-based compensation of $75 million, further supported cash provided by operating activities and increased year over year, primarily due to incremental non-cash expense from acquisitions and higher equity-based compensation.
Cash provided by operating activities also benefited from changes in working capital. Higher Receivables decreased cash from operations by $342 million, compared to a decrease in cash from operations of $368 million in the prior year period, driven by the timing of collections from customers. Higher Inventories decreased cash from operations by $100 million, compared to a decrease in cash from operations of $228 million in the prior year period, driven by the impact of increased raw material costs and tariffs in the prior year period. Lower Customer deposits decreased cash from operations by $149 million, compared to a $1 million increase in cash from operations in the prior year, from changes in the timing of customer deposits.
Investing activities In the first nine months of 2026 and 2025, cash used for investing activities was $1,243 million and $1,887 million, respectively. During the first nine months of 2026, Wabtec used $1,062 million for acquisitions, primarily for Dellner Couplers and $182 million for additions to property, plant and equipment for investments in our facilities and manufacturing processes. During the first nine months of 2025, Wabtec used $1,755 million for acquisitions, primarily for Inspection Technologies, and $138 million for additions to property, plant, and equipment.
Financing activities In the first nine months of 2026, cash used for financing activities was $147 million, which included $855 million of inflows from net changes in debt, which was more than offset by $762 million of stock repurchases, $158 million of dividend payments, $55 million of payments for income tax withholding on share-based compensation, and $19 million of distributions to/redemption of noncontrolling interest. In the first nine months of 2025, cash provided by financing activities was $907 million, which included $1,235 million of inflows from net changes in debt, partially offset by $148 million of stock repurchases, $130 million of dividend payments, $39 million of payments for income tax withholding on share-based compensation, and $6 million of distributions to noncontrolling interest.
During 2026, the Company entered into $250 million of interest rate hedge contracts to manage its net exposure to interest rate changes and its overall cost of borrowing.
During the second quarter of 2025, the Company entered into the 2025 Credit Agreement, which amended, restated and refinanced certain prior credit agreements. The 2025 Credit Agreement increased the amount available under the Revolving Credit Facility to $2.0 billion and provided a Term Loan Facility of $725 million. The Term Loan Facility was utilized to refinance (i) $250 million of the outstanding delayed draw term loan borrowings and (ii) $225 million of the outstanding term loan borrowings, each under a prior credit agreement. During the third quarter of 2025, the remaining $250 million under the Term Loan Facility was drawn and utilized as part of funding for the Inspection Technologies acquisition.
Also during the second quarter of 2025, the Company issued $500 million of Senior Notes due in 2030 and $750 million of Senior Notes due in 2035. Proceeds from the 2030 Notes and cash on hand were utilized to repay the outstanding amount of the Company's 3.20% Senior Notes due 2025 at maturity. Proceeds from the 2035 Notes were utilized as part of funding for the Inspection Technologies acquisition.
As of September 30, 2026, the Company held approximately $489 million of cash, cash equivalents and restricted cash, which was primarily held outside of the United States, mainly in Europe, India, South Africa, and China. While repatriation of some cash held outside the United States may be restricted by local laws, most of the Company's foreign cash could be repatriated to the United States net of any tax impacts. As of September 30, 2026, approximately $11 million of the Company's cash balance was classified as restricted, primarily for cash held in escrow related to acquisitions.
The Company's goal is to maintain an investment-grade credit profile, which supports access to diverse sources of liquidity and favorably impacts borrowing costs. Rating agencies that are engaged by the Company periodically update our credit ratings as events occur. As of September 30, 2026, the long-term credit ratings assigned to the Company were BBB with a stable outlook by Fitch Ratings, Baa2 with a stable outlook by Moody's Investors Service, and BBB with a stable outlook by S&P Global Ratings.
We or our affiliates may, from time to time, seek to retire or purchase outstanding debt through negotiated or open-market cash purchases, exchanges, or otherwise, and such transactions, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
Revolving Receivables Program
The Company utilizes its Revolving Receivables Program to request borrowings from a financial institution against certain collateralized receivables for up to $450 million. The Company collateralizes certain receivables through our bankruptcy-remote subsidiary on a recurring basis. As customers pay their balances, we transfer additional receivables into the program. Borrowings and repayments under the Revolving Receivables Program are included within Proceeds from debt and Payments of debt within the Financing activities section of the Condensed Consolidated Statement of Cash Flows.
During the nine months ended September 30, 2026, the Company borrowed and repaid $526 million and $99 million, respectively, against the collateralized receivables. During the nine months ended September 30, 2025, the Company borrowed and repaid $800 million and $600 million, respectively, against the collateralized receivables. Additional information with respect to the Revolving Receivables Program is included in Note 2 of "Notes to Condensed Consolidated Financial Statements" included in Part I, Item 1 of this report.
Supply Chain Financing Program
The Company has entered into supply chain financing arrangements with third-party financial institutions to provide our vendors with enhanced payment options while providing the Company with added working capital flexibility. The Company does not provide any guarantees under these arrangements, does not have an economic interest in our suppliers' voluntary participation, does not receive an economic benefit from the financial institutions, and no assets are pledged under the arrangements. The arrangements do not change the payable terms negotiated by the Company and our vendors and do not result in a change in the classification of amounts due as Accounts payable in the Condensed Consolidated Balance Sheets. Additional information with respect to the Supply Chain Financing Program is included in Note 2 of "Notes to Condensed Consolidated Financial Statements" included in Part I, Item 1 of this report.
Total Available Liquidity
The components of total available liquidity were as follows:
| In millions |
September 30, 2026 |
December 31, 2025 |
|||||||||
| Cash and cash equivalents, excluding restricted cash | $ | 478 | $ | 764 | |||||||
| Revolving Credit Facility | 1,613 | 2,000 | |||||||||
|
Revolving Receivables Program
|
- | 443 | |||||||||
| Total Available Liquidity | $ | 2,091 | $ | 3,207 | |||||||
The Company believes that its existing cash balances, cash generated from operations, available borrowings under its credit facilities, and access to the capital markets will be sufficient to meet its working capital needs, planned capital expenditures, debt service requirements, dividends, share repurchases, and other known cash requirements for at least the next twelve months.
Guarantor Summarized Financial Information
Westinghouse Air Brake Technologies Corporation (the "Parent Company") has issued 3.45% Senior Notes due 2026, 4.70% Senior Notes due 2028, 4.90% Senior Notes due 2030, 5.611% Senior Notes due 2034, and 5.50% Senior Notes due 2035 (collectively, the "US Notes").
The obligations under the US Notes issued by the Parent Company have been fully and unconditionally guaranteed by certain of the Parent Company's U.S. subsidiaries ("Guarantor Subsidiaries"), currently comprising GE Transportation, a Wabtec Company, RFPC Holding Corp., Transportation IP Holdings, LLC, Transportation Systems Services Operations Inc., Wabtec Components LLC, Wabtec Holding LLC, Wabtec Railway Electronics Holdings, LLC, Wabtec Transportation Systems, LLC and Wabtec US Rail, Inc. Each guarantor is 100% owned by the Parent Company. The Euro Notes are issued by Wabtec Transportation Netherlands B.V. ("Wabtec Netherlands") and are fully and unconditionally guaranteed by the Parent Company.
The following tables present summarized financial information of the Parent Company and the Guarantor Subsidiaries on a combined basis. The combined summarized financial information eliminates (i) all intercompany balances and transactions among the Parent Company and Guarantor Subsidiaries as well as (ii) all equity in earnings from and investments in any subsidiary that is not a Guarantor Subsidiary, which we refer to below as the non-guarantor subsidiaries.
The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the Parent Company, as the issuer of the US Notes, and Guarantor Subsidiaries.
Summarized Statement of Income
| Unaudited | ||||||||
| Parent Company and Guarantor Subsidiaries | ||||||||
| In millions | Nine Months Ended September 30, 2026 | |||||||
| Net sales | $ | 4,954 | ||||||
| Gross profit | $ | 931 | ||||||
| Net loss attributable to Wabtec shareholders | $ | (253) | ||||||
Summarized Balance Sheet
| Unaudited | ||||||||||||||
| Parent Company and Guarantor Subsidiaries | ||||||||||||||
| In millions | September 30, 2026 | December 31, 2025 | ||||||||||||
| Current assets | $ | 1,083 | $ | 1,434 | ||||||||||
| Noncurrent assets | $ | 3,242 | $ | 3,311 | ||||||||||
| Current liabilities | $ | 3,090 | $ | 3,236 | ||||||||||
| Long-term debt | $ | 4,092 | $ | 3,701 | ||||||||||
| Other non-current liabilities | $ | 660 | $ | 605 | ||||||||||
The following is a description of the transactions between the combined Parent Company and Guarantor Subsidiaries with non-guarantor subsidiaries.
| Unaudited | ||||||||
| Parent Company and Guarantor Subsidiaries | ||||||||
| In millions | Nine Months Ended September 30, 2026 | |||||||
| Net sales to non-guarantor subsidiaries | $ | 749 | ||||||
| Purchases from non-guarantor subsidiaries | $ | 1,396 | ||||||
| Unaudited | ||||||||
| Parent Company and Guarantor Subsidiaries | ||||||||
| In millions | September 30, 2026 | |||||||
| Amount due to non-guarantor subsidiaries | $ | 6,173 | ||||||
Summarized Financial Information-Euro Notes
The obligations under Wabtec Netherlands' Euro Notes are fully and unconditionally guaranteed by the Parent Company. Wabtec Netherlands is a wholly owned, indirect subsidiary of the Parent Company. Wabtec Netherlands is a holding company and does not have any independent operations. Its assets consist of its investments in subsidiaries, which are separate and distinct legal entities that are not guarantors of the Euro Notes and have no obligations to pay amounts due under Wabtec Netherlands' obligations.
The following tables present summarized financial information of Wabtec Netherlands, as the Issuer of the Euro Notes, and the Parent Company, as the parent Guarantor, on a combined basis. The combined summarized financial information eliminates (i) all intercompany balances and transactions among Wabtec Netherlands and the Parent Company as well as (ii) all equity in earnings from and investments in any subsidiary of the Parent Company, other than Wabtec Netherlands, which we refer to below as the non-guarantor subsidiaries.
The summarized financial information is provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for Wabtec Netherlands, as the issuer of the Euro Notes, and Parent Company guarantor.
Summarized Statement of Income
| Unaudited | ||||||||
| Issuer and Parent Company (Guarantor) | ||||||||
| In millions | Nine Months Ended September 30, 2026 | |||||||
| Net sales | $ | 453 | ||||||
| Gross profit | $ | 143 | ||||||
| Net loss attributable to Wabtec shareholders | $ | (320) | ||||||
Summarized Balance Sheet
| Unaudited | ||||||||||||||
| Issuer and Parent Company (Guarantor) | ||||||||||||||
| In millions | September 30, 2026 | December 31, 2025 | ||||||||||||
| Current assets | $ | 164 | $ | 508 | ||||||||||
| Noncurrent assets | $ | 661 | $ | 656 | ||||||||||
| Current liabilities | $ | 1,884 | $ | 1,822 | ||||||||||
| Long-term debt | $ | 4,660 | $ | 4,286 | ||||||||||
| Other non-current liabilities | $ | 49 | $ | 42 | ||||||||||
The following is a description of the transactions between the combined Wabtec Netherlands, as the Issuer of the Euro Notes, and the Parent Company, as the parent Guarantor, with the subsidiaries of Westinghouse Air Brake Technologies Corp., other than Wabtec Netherlands, none of which are guarantors of the Euro Notes.
| Unaudited | ||||||||
| Issuer and Parent Company (Guarantor) | ||||||||
| In millions | Nine Months Ended September 30, 2026 | |||||||
| Net sales to non-guarantor subsidiaries | $ | 27 | ||||||
| Purchases from non-guarantor subsidiaries | $ | 95 | ||||||
| Unaudited | ||||||||
| Issuer and Parent Company (Guarantor) | ||||||||
| In millions | September 30, 2026 | |||||||
| Amount due to non-guarantor subsidiaries | $ | 10,228 | ||||||
Company Stock Repurchase Plan
On February 6, 2026, the Board of Directors reauthorized the stock repurchase program and refreshed the amount available for stock repurchases to $1.2 billion of the Company's outstanding shares. This new stock repurchase authorization supersedes the previous authorization of $1.0 billion, of which approximately $760 million remained at the reauthorization date. No time limit was set for the completion of the program, which conforms to the requirements under the agreements governing the Company's credit facilities and the indentures for the Senior Notes currently outstanding. The Company may repurchase shares in the future at any time, depending upon market conditions, our capital needs and other factors. Purchases of shares may be made by open market purchases or privately negotiated purchases and may be made pursuant to Rule 10b5-1 plan or otherwise. As of September 30, 2026, approximately $456 million was remaining under the stock repurchase plan.
Forward Looking Statements
We believe that all statements other than statements of historical facts included in this report, including certain statements under "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," may constitute forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure that our assumptions and expectations are correct.
These forward-looking statements are subject to various risks, uncertainties and assumptions about us, including, among other things:
Economic and industry conditions
•changes in general economic and/or industry specific conditions, including the impacts of tax and tariff programs, inflation, supply chain disruptions, foreign currency exchange, and industry consolidation;
•the impacts of significant recent shifts in trade policies, including the imposition of tariffs, retaliatory tariff measures, and subsequent modifications or suspensions thereof, and market reactions to such policies and resulting trade disputes;
•prolonged unfavorable economic and industry conditions in the markets served by us, including North America, South America, Europe, Australia, Asia and Africa;
•decline in demand for freight cars, locomotives, passenger transit cars, buses and related products and services;
•reliance on major original equipment manufacturer customers;
•original equipment manufacturers' program delays;
•decreased demand for services in the freight and passenger rail industry;
•decreased demand for our products and services;
•orders either being delayed, canceled, not returning to historical levels or being reduced, and/or economic conditions affecting the ability of our customers to pay timely for goods and services delivered;
•consolidations in the rail industry;
•continued outsourcing by our customers;
•industry demand for faster and more efficient braking equipment;
•fluctuations in interest rates and foreign currency exchange rates;
•availability of credit or difficulty in obtaining debt or equity financing;
•changes in market consensus as to what attributes are required for projects to be considered "green" or "sustainable" or negative perceptions regarding determinations in such regard with respect to our Green Finance Framework or sustainability strategy; or
•changes in the sustainability topics that have the highest relative priority for Wabtec's external stakeholders;
Operating factors
•supply disruptions;
•technical difficulties;
•changes in operating conditions and costs;
•increases in raw material costs;
•challenges associated with the successful introduction of new products;
•product safety, quality and reliability;
•performance under material long-term contracts;
•labor availability constraints and labor relations challenges;
•the outcome of our existing or any future legal proceedings, including litigation involving our principal customers and any litigation with respect to environmental matters, asbestos-related matters, pension liabilities, warranties, product liabilities, competition and anti-trust matters or intellectual property claims;
•our ability to successfully complete and integrate acquisitions;
•risks associated with the development and use of new technology; or
•cybersecurity and data protection risks;
Competitive factors
•the actions of competitors; or
•adverse outcomes of negotiations with partners, suppliers, customers or others;
Political/governmental factors
•political instability in relevant areas of the world, including the impacts of war, conflicts, global military action, and acts of terrorism;
•future regulation/deregulation of our customers and/or the rail industry;
•decreases in levels of governmental funding on transit projects, including for some of our customers;
•political developments and laws and regulations, including those related to Positive Train Control;
•consequences of federal and state income tax legislation;
•sanctions imposed on countries and persons; or
•the outcome of negotiations with governments;
Natural hazards / health crises
•impacts of climate change, including evolving climate change policy;
•disruptive natural hazards, including earthquakes, fires, floods, tornadoes, hurricanes or other weather conditions;
•epidemics, pandemics, or similar public health crises;
•deterioration of general economic conditions as a result of natural hazards or health crises;
•shutdown of one or more of our operating facilities as a result of natural hazards and health crises; or
•supply chain and sourcing disruptions as a result of natural hazards, health crises or other external factors
Statements in this Quarterly Report on Form 10-Q apply only as of the date on which such statements are made, and except as required by law, we undertake no obligation to update any statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Reference is also made to the risk factors set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
Critical Accounting Estimates
A summary of critical accounting estimates is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. In particular, judgment is used in areas such as inventories, business combinations, goodwill and indefinite-lived intangible assets, warranty reserves, income taxes, and revenue recognition. There have been no significant changes in the related accounting policies since December 31, 2025.
Wabtec Corporation - Westinghouse Air Brake Technologies Corporation published this content on October 21, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 21, 2026 at 14:13 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]