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Here's Why Westinghouse Air Brake Technologies Corp.'s Stock Is Slumping Today

What happened

Shares of Westinghouse Air Brake Technologies Corp. (NYSE: WAB), or Wabtec, slumped on Tuesday, falling as much as 14.9% by 11:30 a.m. EDT after the company reported lackluster second-quarter results before the market opened.

So what

While Wabtec's revenue jumped 29% to $932.3 million, that was $77.8 million below the consensus estimate. Driving the miss was lower revenue from freight car and locomotive components as well as a slower-than-expected ramp-up of certain projects. On top of that, changes in foreign exchange rates cut sales by $15 million versus the year-ago quarter. These factors offset the positive impact from the company's acquisition of Faiveley Transport, which fueled an 80% increase in sales in the company's transit group.

Image source: Getty Images.

The weaker-than-expected sales growth resulted in the company missing earnings expectations as well. Heading into the quarter, analysts expected that Wabtec would earn $0.94 per share. However, the company only made $0.75 per share, which includes a $0.05-per-share impact from the additional costs related to the Faiveley deal.

Given the lower-than-predicted results during the second quarter, as well as tepid results last quarter, Wabtec is adjusting its full-year guidance. It now forecasts sales for the full year to be $3.85 billion, which is down from its initial outlook that they'd be about $4.1 billion. Similarly, the company sees earnings coming in the range of $3.55 to $3.70 per share, which is down from its initial range of $3.95 to $4.15 per share.

Now what

While the challenges in the rail market haven't abated as quickly as Wabtec expected, CEO Raymond Betler stated in the earnings release that "we remain confident in our future growth opportunities." One of the drivers of that confidence was the 10% increase in its multiyear backlog over the past quarter. As a result, the company now has a record $4.5 billion backlog, which hints at a future improvement in sales and earnings, especially when rail market conditions finally start rebounding as expected.

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Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Westinghouse Air Brake Technologies. The Motley Fool has a disclosure policy.