Trailer manufacturer Wabash National, which has seen a sharp downturn in its financial measurements, has hung on to its credit rating from S&P Global, but its outlook has been lowered to negative by the ratings agency.
S&P said it was affirming Wabash’s BB- issuer credit rating. It also has a B+ issue-level rating on the company’s senior unsecured notes, as well as a recovery rating of 5. Those were both affirmed by S&P.
A negative outlook at S&P Global means conditions are in place that may lead to a downgrade in a company’s rating. The recovery rating is on a scale of 1 to 6, and S&P defines that rating as measuring “the recovery prospects of a given loan or bond from a speculative-grade issuer, calculated on a nominal basis, based on future hypothetical default scenarios.” A 6 rating is highest on the scale.
Rival ratings agency Moody’s (NYSE: MCO) has not taken any action on Wabash National. Moody’s has a rating of Ba3 on Wabash National, having upgraded the company last December. Moody’s Ba3 and S&P’s BB- are considered equivalent. Both the Moody’s and S&P Global ratings are three notches below investment-grade.
Moody’s outlook on Wabash is listed as stable.
The new negative outlook for Wabash (NYSE: WNC), the ratings agency said, is based on its “expectation that … free operating cash flow to debt will remain in the high single digit area in 2024 and 2025 as the ongoing freight recession extends beyond our previous expectation.” It added that the number could rise above 10% in 2026 if there is increased freight demand.
A spokeswoman for Wabash declined comment.
That Wabash National is struggling financially is not news. Third-quarter revenue was down 26.7% year on year, and the $464 million it reported was about $13.3 million less than Wall Street forecasts, according to SeekingAlpha.
In its latest earnings report, Wabash posted a GAAP operating loss of $433 million, as it took a $450 million charge related to a recent nuclear verdict against the company.
Other numbers in Wabash’s earnings were all negative. Sales dropped to $415.5 million from $582.9 million. The gross profit margin was 10.8%, compared to 18.5% a year ago. Income from operations was $29.1 million compared with $89.4 million a year ago.
Wabash National stock is down 16.9% in the past year, closing Tuesday at $18.04.
Away from the financials, operating numbers at Wabash National paint a decidedly negative picture. The earnings report said Wabash shipped 7,585 trailers in the third quarter, compared with 10,765 a year ago. Shipments of new truck bodies declined to 3,630 from 4,160.
Noting the decline in deliveries, S&P Global (NYSE: SPGI) said Monday it expects deliveries to “remain weak” into at least the first half of next year.
S&P’s projections are for revenue declines of 22%-24% this year and 0%-2% next year, when the comparisons will be against the weak 2024 performance. The previous expectations at S&P were for a revenue decline of 12.1% this year and revenue growth next year of 7.5%.
While the hit on trailer deliveries comes out of Wabash’s Transportation Solutions segment, S&P said Wabash’s smaller Parts and Service segment has been affected by the weak freight market as well. Its forecast is for that segment within Wabash to suffer a revenue decline of 4%-6% this year and growth of 10%-12% next year. The previous forecast was revenue growth of 13.3% both this year and in 2025.
S&P’s action also is based on its reduced estimate of trailer and truck body deliveries. Its current estimate is that Wabash this year will deliver 32,300 trailers and 14,650 truck bodies. Its earlier estimate was 38,100 and 16,070, respectively.
Through nine months, Wabash had delivered 25,330 trailers and 11,245 truck bodies.
Its estimate for 2025 is 33,000 trailers and 15,100 truck bodies. “As freight demand remains weak, truck carriers are delaying trailer orders well below our previous expectation,” S&P said. “Despite softness in the near term we expect trailer deliveries will improve toward 2026.”
S&P Global also cut its estimate of the average selling price (ASP) for the company’s products. The ratings agency projects the price of Wabash trailers will be $41,000 in 2024, down $1,000, and $39,100 in 2025, down $900 from its earlier estimate.
For truck bodies, S&P actually increased its projections. It sees the average selling price at $29,000 this year and in 2025, compared with an earlier estimate of $25,000 this year and $24,000 next year.
As it noted, “these are well above pre-pandemic average selling prices of $20,000 for trailers and $16,800 for truck bodies.”
“Wabash has been able to increase ASPs due to the strong demand environment for trailers after the pandemic and more recently truck bodies, and we would expect this [to moderate] over time as demand normalizes,” S&P said.
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