WAB: train braking systems company. 52-week low is mid $70. Could get there in a few weeks.
In a Tuesday call for rail-safety improvements after the toxic derailment in East Palestine, Ohio , Transportation Secretary Pete Buttigieg headlined freight rail staffing levels, safer tank cars, and higher fines.
Also on the list was a request that Congress push railroads to deploy new braking systems. Government backing for this technology -- known as electronically controlled pneumatic brakes, or ECP -- would benefit train manufacturers such as Wabtec (ticker: WAB).
Buttigieg's response to the Feb. 3 chemical spill said the Transportation Department would push to require at least two crew members on most trains, and ensure that humans continue to oversee new automated-track-inspection systems. The rail industry has resisted these labor mandates, as well as demands for paid sick leave that held up the recent labor contract. Buttigieg said the DOT will enhance its inspection programs.
Congressional action would be required for other items on his safety list. Those include moving up the deadline for use of safer tank cars. That deadline is 2029, but Buttigieg noted that when originally proposed in 2015, the rule had set a 2025 deadline.
Buttigieg also urged Congress to increase the maximum fine for rail-safety violations -- which currently tops out at just over $225,000 . "This is a rounding error," he said, for the operator of the derailed train, Norfolk Southern (NSC), which reported cash operating profit of nearly $6 billion in 2022.
And the Transportation Dept. will push for electronically controlled pneumatic brakes. If the DOT can't require ECP brakes through its own rules, it will seek a mandate from Congress , where Buttigieg said there is new bipartisan support for the technology.
Wells Fargo analyst Allison Poliniak-Cusic wrote recently that ECP brakes gained interest after the 2013 train disaster that killed 47 people in Lac-Mégantic, Quebec . The technology would have been phased in under a rail safety law passed by Congress in 2015, but the ECP mandate was dropped under the Trump administration.
Poliniak-Cusic says ECP brakes reduce stopping distances by more than 50%. Cost was one of the industry objections to the 2015 mandate. She says the systems cost $5,000 to $8,000 a car, and would add up to $9 billion across the industry.
That would be good business for Westinghouse Air Brake Technologies , better-known as Wabtec . The Wells Fargo analyst has a Buy rating and a $125 price target on the stock, which was trading Wednesday at $104 .
Besides cost, the rail industry has opposed an ECP brake mandate by questioning the technology's reliability. But after the Ohio accident, Poliniak-Cusic believes support for ECP could grow.
