Wabash (WNC)

Semi trailers and liquid transportation container manufacturer Wabash (NYSE:WNC) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 26.1% year on year to $380.9 million. The company’s full-year revenue guidance of $1.8 billion at the midpoint came in 3.9% below analysts’ estimates. Its non-GAAP loss of $0.58 per share was significantly below analysts’ consensus estimates.

Company Overview

With its first trailer reportedly built on two sawhorses, Wabash (NYSE:WNC) offers semi trailers, liquid transportation containers, truck bodies, and equipment for moving goods.

Heavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.

Competitors offering similar products include Trinity (NYSE:TRN), Great Dane (private), and Utility Trailer Manufacturing (private).

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Wabash struggled to consistently generate demand over the last five years as its sales dropped at a 3.6% annual rate. This was below our standards and is a sign of poor business quality.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Wabash’s recent performance shows its demand remained suppressed as its revenue has declined by 16.1% annually over the last two years. Wabash isn’t alone in its struggles as the Heavy Transportation Equipment industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Wabash’s backlog reached $1.2 billion in the latest quarter and averaged 32.8% year-on-year declines over the last two years. Because this number is lower than its revenue growth, we can see the company hasn’t secured enough new orders to maintain its growth rate in the future.

This quarter, Wabash missed Wall Street’s estimates and reported a rather uninspiring 26.1% year-on-year revenue decline, generating $380.9 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 9.3% over the next 12 months, an improvement versus the last two years. This projection is admirable and implies its newer products and services will catalyze better top-line performance.

Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.

Wabash has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 13.9% gross margin over the last five years. That means Wabash paid its suppliers a lot of money ($86.12 for every $100 in revenue) to run its business.

In Q1, Wabash produced a 5% gross profit margin, down 9.8 percentage points year on year. Wabash’s full-year margin has also been trending down over the past 12 months, decreasing by 7.4 percentage points. If this move continues, it could suggest deteriorating pricing power and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Wabash was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.8% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Wabash’s operating margin decreased by 6.3 percentage points over the last five years. Wabash’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Wabash generated an operating profit margin of 82.6%, up 76.8 percentage points year on year. The increase was solid, and because its revenue and gross margin actually decreased, we can assume it was more efficient because it trimmed its operating expenses like marketing, R&D, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Wabash, its EPS declined by 30.6% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

We can take a deeper look into Wabash’s earnings to better understand the drivers of its performance. As we mentioned earlier, Wabash’s operating margin improved this quarter but declined by 6.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Wabash, its two-year annual EPS declines of 73.7% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, Wabash reported EPS at negative $0.58, down from $0.39 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Wabash’s full-year EPS of $0.21 to grow 352%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Wabash has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.7%, subpar for an industrials business.

Taking a step back, we can see that Wabash’s margin dropped by 2.7 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s in the middle of an investment cycle.

Wabash burned through $8.97 million of cash in Q1, equivalent to a negative 2.4% margin. The company’s cash burn slowed from $36.6 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Wabash historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 0.3%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Wabash’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Wabash reported $81.04 million of cash and $417.3 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $99.36 million of EBITDA over the last 12 months, we view Wabash’s 3.4× net-debt-to-EBITDA ratio as safe. We also see its $4.39 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We struggled to find many positives in these results. Revenue and EPS in the quarter missed. Its full-year revenue guidance missed significantly and its full-year EPS guidance fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 12.9% to $8.68 immediately after reporting.

Updated: July 10, 2025 at 11:27 PM EDT

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Wabash doesn’t pass our quality test. First off, its revenue has declined over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its declining operating margin shows the business has become less efficient.

Wabash’s P/E ratio based on the next 12 months is 11.7x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $12.75 on the company (compared to the current share price of $11.17).