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WABCO Acquired MICO Incorporated to Expand Its Portfolio

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Price movement of WABCO

WABCO Holdings (WBC) has a market cap of $5.0 billion. WBC fell by 3.6% to close at $87.40 per share as of February 2, 2016. The price movement on a weekly, monthly, and year-to-date (or YTD) basis is 0.36%, -14.5%, and -14.5%, respectively.

Technically, the stock has broken the support and is trading below all moving day averages. Currently, WBC is trading 2.5% below its 20-day moving average, 9.9% below its 50-day moving average, and 23.0% below its 200-day moving average.

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The ALPS International Sector Dividend Dogs ETF (IDOG) invests 2.1% of its holdings in WABCO. The ETF tracks an equal-weighted index that selects the five companies with the highest dividend yield in each of the ten GICS sectors from international developed markets. The YTD price movement of IDOG was -4.3% as of February 1, 2016.

The market cap of WABCO’s competitors are as follows:

  • Cummins (CMI) — $15.8 billion
  • PACCAR (PCAR) — $16.8 billion
  • General Motors (GM) — $46.1 billion

WABCO acquired MICO

WABCO acquired MICO Incorporated to expand its products offerings from pneumatic and hydraulic braking and control systems for off-highway vehicles. This acquisition will provide synergies between WABCO and MICO with an increase in market share worldwide.

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Performance of WABCO in fiscal 3Q15

WABCO reported 3Q15 sales of $643.6 million, a fall of 9.0% compared to sales of $707.3 million in fiscal 3Q14. The company’s cost of sales as a percentage of sales rose by 8.8% and its operating income fell by 65.9% in fiscal 3Q15 compared to fiscal 3Q14.

Its net income and EPS (earnings per share) fell to $38.8 million and $0.67, respectively, in fiscal 3Q15, compared to $82.0 million and $1.37, respectively, in fiscal 3Q14.

Meanwhile, its cash and cash equivalents and inventories rose by 32.2% and 15.6%, respectively, in fiscal 3Q15 compared to fiscal 4Q14. Its debt-to-equity ratio rose to 2.3x in fiscal 3Q15 compared to 1.8x in fiscal 4Q14.

The PE (price-to-earnings) and PBV (price-to-book value) ratios of WABCO were 21.2x and 6.5x, respectively, as of February 2, 2016.

Projections

WABCO Holdings (WBC) made the following projection for fiscal 2016:

  • Sales growth in the range of 5.5%–6.5%.
  • Operating margin in the range of 13.4%–13.7%.
  • EPS on a performance basis in the range of $5.50–$5.60.
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