Wabtec (WAB.N) — WAB 3Q Preview: Price-cost setup positive for 2H26, with expected further lift into '27; flat backlog baseline expected

We caught up with WAB and some of its investors on industry trends. A key focal point of the discussions has been price-cost, as we anticipate price-cost setup for WAB to be positive for 3Q given its tariff mitigants step-up in 2H, and it has price escalator and other mechanisms to protect margin from the 3Q fuel spike and labor inflation, although the lag on these may pose an incremental headwind in the near term. We expect further step-up in price-cost into '27 as tariffs are lapped. We see sustained North America rail carload growth as structural, given the alignment of public support for highway safety and the US admin's immigration policy supporting further enforcement of truck driver policy, driving capacity exits and truck-to-rail modal shift, ultimately raising non-backlog and backlog growth for WAB. We expect WAB share buybacks to step up and provide further EPS lift. Model Update: We maintain Buy but lower our TP to $338 (from $341) on 27x (prior 27.5x) our '27e adj. EPS, on