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BMO Capital Markets Downgrades WABCO Holdings to ‘Market Perform’

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Price movement

WABCO Holdings (WBC) has a market cap of $5.9 billion. It fell 0.90% to close at $105.69 per share on January 13, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -0.19%, -4.6%, and -0.43%, respectively, on the same day.

WBC is trading 1.8% below its 20-day moving average, 1.1% above its 50-day moving average, and 1.4% above its 200-day moving average.

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Related ETF and peers

The Schwab US Mid-Cap ETF (SCHM) invests 0.21% of its holdings in WABCO. The YTD price movement of SCHM was 2.0% on January 13.

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

  • Cummins (CMI) — $23.5 billion
  • PACCAR (PCAR) — $23.4 billion

WBC’s rating

On January 13, 2017, BMO Capital Markets downgraded WABCO Holdings’ rating to a “market perform” from an “outperform.” It also reduced the stock’s price target to $115.0 from $120.0 per share.

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Performance of WABCO in 3Q16

WABCO Holdings reported 3Q16 sales of $675.4 million, a rise of 4.9% compared to $643.6 million in 3Q15. The company’s gross profit margin and operating margin rose 590 basis points and 730 basis points, respectively, in 3Q16 compared to 3Q15.

Its net income and EPS (earnings per share) rose to $98.1 million and $1.76, respectively, in 3Q16, compared to $38.8 million and $0.67, respectively, in 3Q15. It reported EPS of $1.54 on a performance basis in 3Q16, a rise of 10.8% compared to 3Q15.

WBC’s cash and cash equivalents and inventories rose 37.8% and 22.8%, respectively, in 3Q16 compared to 4Q15.

Projections

WABCO made the following projections for 2016:

  • sales of $2.80 billion–$2.83 billion
  • sales growth of 7.5%–8.5% in local currencies
  • operating margin of 13.5%–13.8% and diluted EPS of $5.75–$5.85 on a performance basis
  • operating margin of 12.3%–12.6% and diluted EPS of $4.21–$4.31 on a reported basis

This guidance includes non-cash tax expenses due to the European Commission’s ruling against the Belgian tax authority in January 2016.

Now, let’s look at Kellogg Company (K).

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