What Happened?
Shares of rail equipment company Westinghouse Air Brake Technologies (NYSE: WAB) jumped 3.1% in the afternoon session after the Federal Reserve delivered its third and final interest rate cut of the year, lowering the federal funds rate by 25 basis points (0.25%) to a 3.50%-3.75% range.
This dovish action, combined with highly accommodating signals from Chair Jerome Powell and the Federal Open Market Committee (FOMC), sent the Dow Jones Industrial Average and S&P 500 surging. The market's bullish reaction was rooted in several key takeaways from the Fed's announcement. Most significantly, the central bank confirmed it would begin expanding its balance sheet by buying short-term bonds, a move that injects critical liquidity and lowers short-term Treasury yields.
Furthermore, the Fed signaled a shift in priority by removing language that described the labor market as "remaining low," suggesting it would be more focused on supporting economic growth. While the Fed's official forecast projected only one cut for the next year, traders immediately priced in the expectation of more aggressive easing, banking on at least two rate reductions. This widespread anticipation of sustained, low borrowing costs and the virtual certainty that rate hikes would be off the table boosted corporate valuations and created powerful momentum for the equity market rally.
The shares closed the day at $215.58, up 2.8% from previous close.
Is now the time to buy Wabtec? Access our full analysis report here.
What Is The Market Telling Us
Wabtec’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock dropped 11.1% on the news that the company delivered a weaker-than-expected quarter, with both revenue and EPS missing estimates and guidance for both metrics coming in below Wall Street's expectations. Growth was weighed down by the Freight segment, where sales were nearly flat. The Transit segment, however, grew 7.1%, helping lift overall revenue by 2.3%. Wabtec also introduced a new five-year forecast, targeting mid-single-digit annual revenue growth and 3.5 percentage points of adjusted operating margin expansion. The stock's reaction suggests investors were looking for stronger guidance.
Wabtec is up 14.3% since the beginning of the year, and at $215.92 per share, has set a new 52-week high. Investors who bought $1,000 worth of Wabtec’s shares 5 years ago would now be looking at an investment worth $2,864.
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