With the growth of the economy, demand for trucks and semi-trailers are also increasing. Therefore, the trailer manufacturers are in a good position to deliver healthy returns. A great player in this industry is Wabash National Corp. (WNC, Financial).
This leading manufacturer has posted excellent quarterly results, including a 3.08% increase in total sales. For fiscal 2015, the company has achieved record operating EBITDA of $229.5 million, or 11.3% of net sales.
Founded in 1985, Wabash National is a diversified industrial manufacturer and North America’s leading producer of semi-trailers and liquid transportation systems. The company manufactures a diverse range of products including dry freight and refrigerated trailers, platform trailers, bulk tank trailers, dry and refrigerated truck bodies, truck-mounted tanks, intermodal equipment, aircraft refueling equipment, structural composite panels and products, trailer aerodynamic solutions, and specialty food grade and pharmaceutical equipment under the brand names of Wabash National, Beall, Benson, Brenner, and many others.
Wabash operates in three reportable segments as follows:
- Commercial Trailer Products: largest segment that constitutes 72% of 2015’s consolidated revenue.
- Diversified Products: constitutes 20% of 2015’s consolidated revenue.
- Retail: constitutes only 8% of 2015’s consolidated revenue.
Strong fourth-quarter results
On Feb. 2, the Lafayette, Indiana- based company reported its financial results for the fourth quarter and full year ended Dec. 31, 2015. The company’s net sales increased 3.08% to $543.71 million, compared to $527.48 million for the comparable prior-year period. Net income accelerated to $33.29 million, or 50 cents per diluted share, an increase of 74.38% over the prior-year period.
Wabash’s adjusted earnings (on a non-GAAP basis) increased 78.84% to $34.14 million, or 51 cents per diluted share, a sharp increase of $15 million over the prior-year period. Operating EBITDA (on a non-GAAP basis) also accelerated to $68.64 million, a notable increase of 48.73%, compared to $46.15 million in the year-ago quarter.
Gross profit and general and administrative expenses for the reported quarter increased 40.02% to $87.82 million and 17.5% to $19.74 million, compared to $62.72 million and $16.80 million. Wabash ended the quarter with cash and cash equivalents of $178.85 million and long-term debt of $275.34 million, a decrease of 15.22%, compared to $324.78 million in the prior year period.
Segments’ performance for the reported quarter
The Commercial Trailer Products segment has provided an outstanding performance and net sales increased primarily due to an improved pricing environment and the 2.2% increase in new trailer shipments during the quarter. Net sales in the Diversified Products segment decreased mainly due to reduced tanker trailer shipments. Further, Retail segment’s net sales decreased sharply mainly due to lower shipments of new trailers as a result of channel optimization activities and early depletion of build slots.
Fiscal 2015 results
A chart has been provided below to show the company’s different metrics for fiscal 2015, compared with fiscal 2014.
Share repurchase
During the quarter, Wabash repurchased $19 million of shares and completed the $60 million share repurchase program authorized by the board of directors in December 2014. Further, the company has approved the previously announced repurchase of up to an additional $100 million of its common stock over a two-year period.
Projections for fiscal 2016
Wabash expects to deliver a strong fiscal 2016 by introducing innovative and new products. By 2020, the company expects its consolidated revenue and EPS growth will be more than $3 billion and $2.50. Further, it expects consolidated operating margin and ROIC more than 10% and 20%.
Growth
Wabash has taken several growth initiatives for its segments’ performance. For Commercial Trailer Products, initiatives are: international market development, cold chain development, indirect channel development, and transportation related aftermarket parts.
For Diversified Products, initiatives include next generation composite panels, freight decking systems, commercial cargo trailer market and aerodynamic solutions portfolio.
For Retail, initiatives include local market competitiveness, expanding customer site service offering and expansion of tank trailer parts and service.
(Source: Company website)
On a concluding note
Overall, Wabash is a rock-solid company with disciplined balance sheet management, balanced capital allocation, strong earnings, cash generation and ROIC, and margin expansion. The company’s diversification efforts are driving results. Since 2007, its revenue, gross margin, and operating income grew more than 80%, 229% and 592%. Further, Wabash has provided a fifth straight year of EPS growth, and from 2011 to 2015, adjusted EPS grew at a CAGR of 81%.
The U.S. economy is improving followed by rising consumer confidence and therefore, the demand for trailer is also increasing. Further, trucking will remain the dominant transportation mode, and as per estimates, trucking will constitute 64.6% of the total transportation mode by 2026. With the recent quarterly release, the company is aiming for a better future and is expected to create greater shareholder returns.
Disclosure: I do not hold any position in the company.
