Wabtec Corporation

Company Description

Wabtec Corporation is a global company servicing the rail industry. Through its subsidiaries, the company manufactures products for locomotives, freight cars and passenger transit vehicles. Wabtec also builds new switcher and commuter locomotives, and provides aftermarket services.

Growth Through Expansion

The company recently announced that it expanded its presence in South Africa by establishing joint ventures to manufacture, supply and service its broad range of products in the region.

?Wabtec has provided products, from brakes shoes to electronic braking, to the African market for many years,? said Albert J. Neupaver, Wabtec?s president and chief executive officer. ?By establishing a local presence in South Africa, we are making a commitment to expand our production and service capabilities in this growing market. We believe customers will benefit from faster response time and direct access to all of Wabtec?s products and services.?

Income

This Growth and Income company declared a quarterly dividend of one cent per share in late July. Wabtec noted that the dividend is payable on Aug. 31, 2008 to holders of record on Aug. 15, 2008.

Record Growth in the Second Quarter

On July 22, the company posted a robust second quarter. Sales increased 20% year-over-year, reaching a record total of $390 million. Second-quarter earnings per share of 69 cents surpassed the year-prior 57 cents and exceeded the consensus estimate by 6%.

The company mentioned that its second quarter performance was strong, with a variety of initiatives driving growth, including international and aftermarket expansion.

Wabtec?s return on equity (ROE) of 20% stands above the industry average of 13%. The company?s earnings per share are expected to grow by 14% over the next 3 ? 5 years, which also tops the industry average of 10%.

Increased Guidance

The company upped its full-year 2008 earnings outlook to approximately $2.65 per share thanks to the strong second quarter and WAB?s forecast for the rest of the year.

Analysts also see a bullish future. All 5 covering analysts boosted 2008 earnings projections from last month?s $2.61 per share to $2.67.

Philippine Telecom a Buy to $72

As the leading provider of telecom services (both fixed line and wireless) in the Philippines, Philippine Long Distance Telephone Company (PHI) stands to benefit from the positive networking effect of the largest subscriber base in the country. The company continues to generate substantial free cash flow enabling higher cash dividend payout and acquisitions.

It has successfully reduced its total debt balance from $3.80 billion in 2002 to $1.5 billion as of June 2008. Consolidated Net Debt is down to $782 million. Smart Communications, the company's wireless subsidiary, continues to maintain its position in terms of subscriber base and profitability. Wireless subscribers by the end of June 2008 stood at over 33.2 million. However, rising fuel and food prices could unfavorably affect revenue growth rate as these compete with telecom services for a share of consumer expenditure.

PLDT is trading at 11.4x our estimate for 2008 earnings, which represents a significant discount to most other telecom carriers in both developed countries and emerging markets. Although the uncertain political climate in the Philippines makes the stock riskier than most, this is partially offset by the company's dominant market position, improved financial position and high operating profit margins.

Given the positive near-term outlook, we believe there is room for the valuation to improve. Our $72.00 target price is based on a forward P/E of 13.1x 2009 earnings. We maintain our Buy recommendation on the shares.

Universal Forest with Headwinds

Universal Forest Products, Inc. (UFPI) reported second quarter earnings of $0.61 per share versus $0.86 per share in the prior-year quarter, due to ongoing weakness in the lumber market and weak consumer spending.