Wabash National Corporation (NYSE:WNC)
Analysts: Sashikanth (Sash) Yenika, Siwei (Lerissa) Li, Vanditha M Ravindranath
Date: December 8, 2015 Recommendation: BUY 500 Shares at mkt (current price is $11.55)
Macroeconomic Outlook & Industry Overview
Wabash National Corporation is a part of Truck Trailer manufacturing industry. According to
American Trucking Association, the industry is estimated to be $682 billion representing around 81%
of the transportation industry revenue. The major demand driver for the industry is the growth in the
freight transported and as the economy improves, ATA estimates that the percentage of freight tonnage
will grow to ~71%. The key drivers in the industry include price of oil, total trade value, price of steel
and the weighted index. The major competitors in the industry include Great Dane Limited Partnership
and Utility Trailers, however the competitors are privately held. The threat of new entrant is low as the
initial cost of investment is high and the access to raw material is highly competitive.
Company Overview
Wabash National Corporation (WNC) was founded in 1985 as a startup firm in Lafayette Indiana. They
are one of the leaders in designing, manufacturing and marketing standard and customized truck and
tank trailers. The company operates in three segments namely Commercial Trailer Products,
Diversified Products and Retail. Wabash’s FY14 revenue is $1.86 Billion. The Consumer Trailer
Products (CTP) is the largest segment contributing to nearly 66% of the revenue, Diversified Products
(DPG) around 24% of the revenue, and Retail is remaining 10% of the revenue.
Strengths for Wabash include long term customer relations, significant market share, technology being
offered and the varied products being offered. Their major customers for Wabash include the leading
fleet operators providing freight services across many industries including Food, Dairy & Beverage,
Chemical, Pharma, Energy and Aerodynamic Services. Wabash intends to diversify their existing
products by expanding the use of DuraPlate composite panel and AeroSkirts technology.
Risks to Business
The risks faced by Wabash are that it is a cyclical industry and the demand for new trailers is
dependent on the economic conditions. The price of raw material is very competitive and the inability
to obtain it will adversely affect operations.
Financial Analysis
Wabash is in the expansion phase and has been growing consistently since 2010. In 2012 they received
an income tax benefit of nearly 57 million which increased the net income thereby increasing the ROE.
The company has been maintaining a high cash balance which has been growing. Wabash has strong
Greenblatt ratio which has indicated a growing trend over the period of 2010-14
Valuation
Comparable Valuation
$19.31
DCF Valuation
$13.63
Final Target Price
$14.77
Recommendation
Based on the valuation and analysis of the company, we suggested a recommendation to buy 500
shares at market price. Buying these shares will add to the diversification of the existing portfolio.