Positioning

Wabash National (WNC): Attractively Vaued And Well-Positioned For 2022 – Seeking Alpha

future-dyanmics

Lafayette, IN - November 2015: Wabash National Corporation Headquarters

jetcityimage/iStock Editorial via Getty Images

jetcityimage/iStock Editorial via Getty Images
Wabash National Corp. (NYSE:WNC) is a diversified semi-truck manufacturer that has been negatively impacted by disruptions caused by the global pandemic. Wabash reported lackluster operating results to end the prior fiscal year, so it should come as no surprise that the company’s stock has underperformed the broader market so far in 2022 by a wide margin.

Chart

However, as shown, WNC shares have performed well since the April 2022 lows. Moreover, I believe that the YTD underperformance has created a buying opportunity for investors that are interested in a company that has great long-term business prospects.
On April 27, 2022, Wabash reported better-than-expected Q1 2022 operating results. The company reported adjusted EPS of $0.24 (beat by $0.14) on revenue of $546.7mm (beat by $65.2mm), which also compares favorably to the year-ago quarter.

Profit & loss statement

Wabash’s Q1 2022 Earnings Slides

Wabash’s Q1 2022 Earnings Slides
Source: Q1 2022 Earnings Slides
Highlights from the quarter:
This was an impressive quarter for Wabash, especially after considering the challenges that the company faced over the second half of 2021. The global pandemic had a significant impact on Wabash and its peer group. The company’s new customer-centric strategy seems to be already bearing fruit and, while there is still a lot of uncertainty, management believes that market conditions remain strong.
For Q1 2022, both of the company’s operating segments reported solid YoY revenue and operating margin growth.

Segment Operating Results

Wabash’s Q1 2022 Earnings Slides

Wabash’s Q1 2022 Earnings Slides
Looking ahead, management expects for continued strength for both of its operating units through the remainder of 2022, barring a significant economic downturn. As such, the company raised its 2022 guidance to record revenue ($2.5bn) and EPS levels not seen since 2019 ($1.90).

Outlook

Wabash’s Q1 2022 Earnings Slides

Wabash’s Q1 2022 Earnings Slides
While the company reported strong operating results for the most recent quarter, investors are now looking ahead and wondering how this company will weather the headwinds that may potentially be created by this challenging operating environment (i.e., high inflation, supply chain issues, etc.). To this point, management spent a considerable amount of time during the conference call discussing how they plan to navigate through this period of economic uncertainty. Basically, they are controlling what they can control while also reaping the benefits of investments that have been made over the last few years.
In addition, during the company’s May 2022 Investor Day, management highlighted the fact that Wabash has plenty of excess liquidity to weather any near-term storms. Additionally, the company has no debt coming due in the near future as a result of the recent debt refinancing efforts.

Liquidity and Debt Maturity

May 2022 Investor Presentation

May 2022 Investor Presentation
Source: May 2022 Investor Presentation
It is hard to argue against the thought that Wabash appears to be in a great position to weather any near-term storms and, in my opinion, a review of the company’s balance sheet also supports this thought-process.

Balance Sheet

Wabash’s Q1 2022 Earnings Slides

Wabash’s Q1 2022 Earnings Slides
There’s a lot to like about Wabash’s balance sheet: an attractive current ratio (1.8), no current debt coming due, and a net debt position supported by operating earnings.
Investors should begin to bake in expectations for Wabash to have a somewhat challenging road over the next few quarters but, in my opinion, management has Wabash well-positioned to contend with any potential headwinds. Moreover, I believe this company still has great long-term business prospects, so any stock price volatility should be viewed as an opportunity.
It also helps the long-term bull case that a lot of the risk has already factored into the stock price.
Wabash’s stock is attractively valued when compared to its peer group.

Valuation comparison

Fidelity

Fidelity
Additionally, the company’s stock is trading well-below its fair value (as determined by Morningstar).

Valuation

Morningstar

Morningstar
I fully expect for Wabash’s stock to experience some volatility over the next few quarters, especially given the current environment, but I do believe that the risk is currently to the upside the longer you are willing (and able) to look out.
A U.S. recession will have a negative impact on Wabash’s business. More specifically, the company’s operations are heavily tied to economic activity, so its customers will likely purchase less of Wabash’s products if its business prospects appear to be declining. Therefore, a deep downturn would materially impact the stock price even at current levels. As such, investors should closely monitor current recession indicators because prolonged economic disruptions will cause downward pressure for Wabash’s stock.
It is likely going to be a tough road for Wabash if the economy faces challenges, but I believe that management will be able to navigate this small-cap company through the uncertainty. Wabash is a cyclical company that will go as the economy goes, but when taking everything into consideration (i.e., shrinking share count, strong business prospects, a more diversified business and a strong liquidity position/balance sheet), it is hard not to like WNC shares at current levels.
It also helps the bull case that the stock is trading at attractive levels. Therefore, in my opinion, Wabash National should be viewed as a potential long-term investment, so investors should consider adding WNC to their watchlists.
Disclaimer: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.
This article was written by
Disclosure: I/we have a beneficial long position in the shares of WNC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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future-dyanmics

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