西屋制动 (WAB) 2026年第三季度业绩电话会：利润率提升并上调每股收益指引lg...

在运营生产力提升、有利的产品组合、并购交易以及货运与轨道交通部门需求的共同推动下，Wabtec（NYSE：WAB）公布2026财年第三季度营业收入、利润率和盈利均实现增长。管理层上调了全年调整后每股收益预期，同时维持营收预期不变。

核心要点

• 第三季度营业收入同比增长8.1%至31.2亿美元。排除汇率变动影响，营业收入增长8.3%。
• 调整后稀释每股收益增长22.0%至2.83美元，按GAAP计算的稀释每股收益增长33.7%至2.42美元。
• 主要受良好的运营执行力、“整合3.0”带来的成本节约、优化的产品组合以及严格的成本控制推动，调整后营业利润率扩大1.9个百分点至22.9%。
• 12个月未完工订单同比增长8.8%，多年期未完工订单增长22.9%，突破310亿美元。
• 货运部门调整后营业利润率达26.4%，提升1.9个百分点。轨道交通部门调整后营业利润率提升2.6个百分点至18.1%。
• 管理层将2026财年调整后每股收益预期上调至10.85美元至11.05美元，按中点计算代表22%的增长。营收预期维持不变。

关键财务数据

业务与运营表现

货运业务

货运业务营业收入增长6.9%。按GAAP计算的部门营业利润为5.15亿美元，营业利润率为23.0%，提升3.2个百分点。调整后营业利润增长15.2%至5.91亿美元，调整后利润率提升至26.4%。

设备销售额略有增长。采矿业务收入的增加在很大程度上被机车交付量的下降所抵消，其中包括从第三季度推迟至第四季度的机车。管理层表示，延迟交付的机车现已发货，不会影响全年营收预期。

在核心服务和现代化改造交付增加的提振下，服务业务收入增长6.7%。零部件销售额增长5.3%，原因是工业、轨道养护及国际需求抵消了北美铁路货车减产和投资组合优化带来的压力。

数字智能（Digital Intelligence）业务销售额增长24.2%，反映出收购Frauscher Sensor Technologies以及核心数字业务需求强劲。

货运部门的12个月未完工订单为65.4亿美元，增长7.5%；其多年期未完工订单增长23.2%至257.7亿美元。

轨道交通业务

轨道交通业务营业收入增长11.3%至8.83亿美元，排除汇率影响后增长12.5%。增长反映了收购Dellner以及产品和服务收入增长的推动作用。

调整后部门营业利润为1.60亿美元。在基础业务势头和Dellner的支撑下，调整后利润率达18.1%，提升2.6个百分点。

轨道交通部门的12个月未完工订单为24.5亿美元，增长12.2%；其多年期未完工订单增长21.4%。

订单与终端市场

Wabtec在本季度获得了价值10亿美元的国际机车及服务订单，其中包括非洲和巴西的订单。在北美，公司从两家一级（Class 1）铁路客户获得超过6亿美元的机车及现代化改造订单。轨道交通部门获得了1.59亿美元的制动设备订单。

北美铁路货运量增长3.5%，推动活跃机车规模高于去年同期。管理层表示，随着机车恢复运营，这支撑了对零部件和服务的更高需求。

管理层业绩预期

Wabtec将其2026财年全年调整后每股收益预期上调至10.85美元至11.05美元。管理层表示，预期的中点意味着22%的增长。全年营收预期保持不变。

管理层预计第四季度利润率扩大幅度将高于第三季度。公司指出，关税带来的同比阻力减弱、产品组合有利，以及与2025财年第四季度计提的薪酬应计项目对比形成有利基数。

长远来看，在五年战略框架下，Wabtec继续以提升超过350个基点的利润率为目标。管理层预计约三分之二的改善将来自成本举措，三分之一来自创新产品。公司预计2027财年利润率将实现增长，但未明确具体幅度。

风险与关注事项

• 行业机构将2026年北美铁路货车交付量预期从约2.5万辆下调至2.3万辆，代表同比下降26%。
• Wabtec约30%的营业收入未体现在未完工订单中，包括铁路货车业务以及长期服务协议之外的零部件销售。这些业务能够更快地对货运量和客户需求的变化做出响应。
• 制造成本上升和净关税部分抵消了第三季度的利润率增长。管理层预计关税作为同比阻力的显著性将有所降低，但潜在成本并未消失。
• 受发货安排或客户验收影响，机车交付时间可能会在不同季度之间发生移动。
• 国际机车市场依然竞争激烈，而北美车队更新决策因客户而异。

分析师问答环节点评

利润率可持续性：管理层指出，卓越运营是第三季度利润率扩大的最大贡献因素。“整合3.0”带来的成本节约超预期，且交付成本低于“整合2.0”时期。投资组合优化正以每年约5000万至1亿美元的速度剥离低回报业务。

未完工订单质量：管理层表示，订单覆盖率达到了Wabtec历史上的最高水平。对于新机车等长周期产品，公司致力于取得未来24至36个月的订单覆盖。管理层还提到，多年期订单的利润率更高。

北美机车市场机遇：Wabtec认为，机车车队的老龄化是潜在的更新换代顺风因素。更广泛的车队更新计划未包含在公司的业绩指引中，管理层尚未观察到客户购买行为发生广泛转变。

国际业务储备：管理层强调了非洲、中亚、亚洲和南美洲的机遇。公司表示，其储备项目在客户和市场方面均实现了多元化，但未提供具体的签约日期。

有机增长：今年迄今的有机增长率为5.2%，管理层预计全年有机增长率将超过5%。近期的收购项目被指表现超出预期计划。

铁路货车前景：管理层预计北美铁路货车市场将迎来拐点，并引用行业预测称，2027年的产量将回升至接近2025年的水平，但仍低于替换率。

业绩电话会议完整文字实录

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完整财报电话会议逐字稿

管理层陈述

Operator

Good day, and welcome to the Wabtec's Third Quarter 2026 Earnings Conference Call.[Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Kyra Yates, Vice President of Investor Relations.

Kyra Yates

Thank you, operator. Good morning, everyone, and welcome to Wabtec's Third Quarter 2026 Earnings Call. With us today are Chairman and CEO, Rafael Santana; CFO, John Olin; and Senior Vice President of Finance, John Mastalerz. Today's slide presentation, along with our earnings release and financial disclosures were posted to our website earlier today and can be accessed on the Investor Relations tab.

Some statements we are making are forward-looking and based on our best view of the world and our business today. For more detailed risks, uncertainties and assumptions relating to our forward-looking statements please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables carefully as you consider these metrics. I will now turn the call over to Rafael.

Rafael Santana

Thanks, Kyra, and good morning, everyone. We delivered another strong quarter, and we are proud of the progress we have made year-to-date. These results reflect the strength across the portfolio disciplined execution by our teams and the continued success of the strategic actions we have taken to enhance our growth profile, expand margins and increase the earnings power of the company. Our teams continue to translate healthy customer demand into profitable growth while investing in technologies that will advance the future of transportation. These investments are strengthening our credit position and reinforcing Wabtec as a leading industrial technology company.

With that, let's move to Slide 4. I I'll start with an update on our business, my perspectives on the quarter and progress against our long-term value creation framework, and then John will cover the financials . We delivered a strong quarter evidenced by continued growth in our backlog, sales, margin and earnings.

In addition, our recent acquisitions continue to perform very well. Sales were $3.1 billion, which was up 8%. Adjusted EPS was up 22% from the year ago quarter. Total cash flow from operations for the quarter was $455 million. Backlog remains a key strength. 12-month backlog was up 8.8% from the prior year, while the multiyear backlog exceeded $31 billion, up 22.9%. These results demonstrate sustained revenue and earnings momentum and provide enhanced visibility for the fourth quarter and into the future.

Our financial position remains strong. We continue to execute against our capital allocation framework, and we expect to continue to compound long-term value for our shareholders.

Shifting our focus to Slide 5. Let's talk about our 2026 and market expectations in more detail. While key metrics across our freight markets remain mixed, we continue to be encouraged by the overall strength and resilience of our business. We are pleased with the momentum in our North America and international markets. And our pipeline of opportunities across geographies continues to support our long-term growth outlook. In North America, carload traffic was up 3.5% in the quarter. As a result of this growth, Wabtec and Industries active locomotive fleet was up compared to last year's third quarter.

Internationally, carload growth during the quarter was mixed but the long-term carload growth trends continue to be robust. Significant investments to expand and upgrade infrastructure are driving our international orders pipeline. Looking at the North America railcar builds. Last quarter, we discussed the industry outlook for 2026, which was approximately 25,000 cars to be delivered and which now has been reduced by industry sources to approximately 23,000 cars. This forecast represents a 26% reduction from last year's car build.

Finally, turning to the transit sector. We continue to see encouraging indicators for growth. Ridership trends remain favorable in key markets, including Europe and India, while car builders continue to maintain strong backlogs supported by robust levels of public investment for fleet expansion and renewal programs.

Next, let's turn to Slide 6 and highlight several recent business wins that demonstrate the strength of the demand across our markets and the momentum we are seeing globally. International demand for our products and services remains strong. During the quarter, we secured $1 billion of locomotive and service orders, which included significant awards in Africa and in Brazil. This win smarter expand our global installed base, strengthen our long-term customer partnerships and create opportunities for attractive, recurring revenues over time.

In North America, we converted over $600 million of pipeline opportunities into new locomotive and modernization orders for 2 Class 1 customers. These orders reflect our customers' continued investment in fleet modernization, productivity improvements and network efficiency.

Moving on to Transit. We were awarded $159 million in brake equipment orders from various customers, reinforcing our strong market position and the healthy underlying demand we continue to see across the Transit sector. Taken together, this win highlights the value of our technology, the strength of our customer relationships and our ability to help customers improve reliability, durability, efficiency and safety. They also reinforce our confidence in the long-term growth opportunities across our freight and transit businesses.

With that, I'll turn the call over to John to review the quarter segment results and our overall financial performance. John?

John Olin

Thanks, Rafael, and hello, everyone. Turning to Slide 7. I will review our results in more detail. Sales for the third quarter were $3.12 billion, which reflects an 8.1% increase versus the prior year, with strong contributions from both the freight in Transit segments, including acquisitions. Excluding the impact of currency, Q3 sales were up 8.3%. As discussed in our last earnings call, we raised our full year revenue guidance, $110 million at the midpoint, reflecting the incremental flow business activity we experienced during the second quarter and our expectations for continued demand in the back half of the year.

While timing of certain locomotive deliveries shifted out of the third quarter and into the fourth quarter, these shifts do not change our view of the strong underlying demand environment or our full year revenue guidance. From a margin standpoint, we anticipated third quarter's margin expansion would be generally in line with the performance achieved during the first half of the year.

In actuality, our operating margin expansion exceeded those expectations. The better-than-expected margin performance included favorable product mix strong operational execution, including productivity benefits from Integration 3.0 and other efficiency initiatives as well as lower operating expenses as a percent of revenue resulting from disciplined cost management.

Having said that, GAAP operating income was $625 million, which was up 27.3% versus the prior year. The increase was predominantly driven by higher sales and improved gross margin. Adjusted operating margin for Q3 was 22.9%, up 1.9 percentage points versus prior year. GAAP earnings per diluted share was $2.42 which was up 33.7% versus the year ago quarter. During the quarter, we had net pretax charges of $5 million for restructuring, which were primarily related to our integration and portfolio optimization initiatives to further integrate and streamline Wabtec's operations.

In addition, versus our Q3 expectations, our earnings benefited from a nonoperational item, which is reported as other income, resulting primarily from the impact of currency fluctuations. In the quarter, adjusted earnings per diluted share was $2.83, up 22.0% versus the prior year. Overall, the quarter reflects the strength of our execution, the resilience of the business and solid momentum as we move into the fourth quarter.

Now turning to Slide 8. Let's review our product lines performance in more detail. Third quarter consolidated sales were up 8.1%. Equipment sales were up slightly from last year's third quarter. During the quarter, revenue benefited from increased mining sales, which were largely offset by lower locomotive deliveries, partly driven by units shifting to the fourth quarter. Services revenue was up 6.7% from last year's third quarter, driven by strong core services sales growth and higher modernization deliveries as expected. Component sales were up 5.3% versus last year due to industrial, maintenance of way and international demand partly offset by the industry's decline in North America railcar build and behind our portfolio optimization efforts.

Digital Intelligence sales were up 24.2% from last year. This was driven by contributions from the Frauscher Sensor Technologies acquisition and strong core digital demand. In our Transit segment, sales were up 11.3%, driven by the Dellner acquisition and growth across our products and services businesses. Foreign currency exchange had an unfavorable impact on sales in the quarter of 1.1 percentage points.

Moving to Slide 9. GAAP gross margin was 37.3%, which was up 2.6 percentage points from the third quarter last year. Adjusted gross margin was up 1.8 percentage points during the quarter. GAAP operating margin was 20.0%, which was up 3.0 percentage points versus last year. Adjusted operating margin improved 1.9 percentage points to 22.9%. Operating margin was positively impacted by favorable product mix and productivity benefits from Integration 3.0 and other efficiency initiatives, which were partly offset by higher manufacturing costs, year-over-year net tariffs, which included a nominal tariff refund. Adjusted GAAP and SG&A expenses were higher year-over-year due largely to the SG&A expense associated with our acquisitions, however, which were lower as a percentage of revenue. Engineering expense was $67 million, $8 million higher than Q3 last year, primarily due to acquisitions. We continue to invest in engineering resources and current business opportunities but more importantly, we are investing in our future as a leading industrial technology company focused on improving our customers' fuel efficiency, labor productivity, capacity utilization and safety.

Now let's take a look at the segment results on Slide 10, starting with the Freight segment. As I already discussed, Freight segment sales were up 6.9%. GAAP segment operating income was $515 million, driving an operating margin of 23.0%, up 3.2 percentage points versus last year. Adjusted operating income for the Freight segment was $591 million, up 15.2% versus the prior year. Adjusted operating margin in the Freight segment was 26.4%, up 1.9 percentage points from prior year. The increase was driven by a 1.5 percentage point improvement in gross margin along with a 0.4 percentage point reduction in operating expenses as a percent of revenue.

Finally, the Freight segment's 12-month backlog was $6.54 billion. Our 12-month backlog was up 7.5%, while the multiyear backlog of $25.77 billion was up 23.2%.

Turning to Slide 11. Transit segment sales were up 11.3% at $883 million. When adjusting for foreign currency, transit sales were up 12.5%. GAAP operating income was $145 million, which reflected the quarter's robust revenue growth and operating margin expansion. Adjusted segment operating income was $160 million. Adjusted operating income as a percent of revenue was 18.1%, up 2.6 percentage points from prior year. With the underlying momentum of the business and the Dellner acquisition serving as key contributors to this quarter's margin expansion. Finally, Transit's 12 months Backlog for the quarter was $2.45 billion, and our 12-month backlog was up 12.2%, while the multiyear backlog was up 21.4%.

Now let's turn to our financial position on Slide 12. Third quarter cash flow generation was $455 million, resulting in a cash conversion of 82%. Our balance sheet and financial position continue to be very strong as evidenced by: first, our liquidity position, which ended the quarter over $2 billion and our net debt leverage ratio, which ended the third quarter at 2.1x. We continue to allocate capital in a disciplined way to maximize returns with an expectation of compounding our earnings for our shareholders. During the quarter, we repurchased $305 million of our shares and paid $52 million in dividends.

With that, I'd like to turn the call over to Rafael to talk about our 2026 financial guidance.

Rafael Santana

Thanks, John. Now let's turn to Slide 13 to discuss our 2026 outlook and guidance. Overall, the team delivered a strong third quarter with our earnings results ahead of our expectations. Importantly, we continue to see the underlying demand for our products and solutions across the business. That demand is reflected in a strong pipeline in both our 12-month and multiyear backlogs provide clear visibility into profitable growth ahead.

As we look at the fourth quarter, in light of our third quarter results and our ongoing underlying momentum, we are raising our full year adjusted EPS guidance. We now expect adjusted EPS to be in the range of $10.85 to $11.05, up 22% at the midpoint. Our revenue guidance remains unchanged.

Looking ahead, I'm confident that Wabtec is well positioned to drive profitable growth to close out a strong 2026. Now let's wrap up on Slide 14. As you've heard today, our team continues to execute against our value creation framework and our 5-year outlook. The strength of our performance reflects the resilience of our installed base, the dedication of our global team, our differentiated technologies and our focus on delivering value for our customers. We also remain encouraged by the integration and early performance of our recent acquisitions. These businesses have strengthened our portfolios, enhanced our technology capabilities and expanded our available markets, creating additional avenues for sustainable growth. These factors continue to reinforce our confidence that Wabtec is uniquely positioned as a leading industrial technology company with a talented global team, strong customer relationships and a clear strategy for growth, we are well positioned to deliver profitable growth and continue to compound shareholder value over time.

With that, I want to thank you for your time this morning, and I'll now turn the call over to Kyra to begin the Q&A portion of our discussion. Kyra?

Kyra Yates

Thank you, Rafael. We will now move on to questions. [Operator Instructions] Operator, we are now ready for our first question.

Operator

[Operator Instructions]

And our first question for today will come from Ken Hoexter with Bank of America.

分析师问答

Ken Hoexter

Rafael, John, Kyra and team. So just jumping in with the margins, right, seems to set a new bar at freight over 26% transit over 18%. Can you talk about kind of the structural gains. I don't know if it's just the acquisitions or maybe, John, talk about sustainability and seasonality. What should we expect into fourth quarter given mix or going into '27?

John Olin

Sure, Ken. This is John. Well, as we mentioned, we had a very strong third quarter. So why don't we start there? The third quarter was up 1.9 percentage points, and that was higher than our expectations, but we were expecting growth in the third quarter, which we've talked about throughout the year. And with that, the biggest drivers, Ken, are really around what I'd call operational excellence. Just fantastic execution by the team throughout the supply chain. With that, we got more everyday productivity, right lean comes in more favorable. Overall plant efficiencies are there.

And in addition to that, the more structural aspects also came in favorable, and that's Integration 3.0, right? We've been running ahead of expectations for that for most of the year, and the program is just running very well. The third quarter was no different. And then on top of that, we've got the portfolio optimization piece, which is basically ridding ourselves of assets that aren't going to take us to the future that we aspire to. So all of that was certainly higher on a year-over-year basis and higher than our expectations. Product mix was also favorable. While we expect the product mix in the quarter to be favorable, it was more favorable than we anticipated.

And remember, Ken, in the first half, we talked about product mix being a headwind that would turn into a tailwind in the back half. So we'll see that carry through the fourth quarter as well. And then finally, overall, the cost management, SG&A as a percentage of revenue was lower. So that's really with regards to the quarter. As we flip forward, Ken, to the fourth quarter, we've talked about this as we expect the fourth quarter to be a fair amount higher in margin expansion than the third quarter. And the reasons for that are a couple fold is: one is the tariff headwinds that we've really experienced quite significantly in the first half, a little bit less so in the third quarter, but a fair amount of headwinds in the third quarter started to dissipate on a year-over-year basis. Those tariffs do not go away, but the year-over-year impact will provide less of a headwind, and therefore, we'll see more margin expansion.

And then partly as to what we compared to in the year ago quarter, the fourth quarter of 2025, we had some comp accruals in there given the very strong overall cash delivery. So with that, we would expect, let's call it, oversized margin in the fourth quarter. And with that, it will deliver, again, $0.20 higher overall EPS as we look forward. But the margins are very sustainable, Ken. The team is doing a great job. A lot of them are cost driven and we can continue to hold that as we move into the future.

Ken Hoexter

Great. And I guess just for a follow-up, your backlog was up almost 9%, I guess, 12 month was down slightly sequentially, total up slightly. I know it's lumpy, but maybe thoughts on organic growth or maybe just any other thoughts you want to throw on the backlog. I know a lot of investors really focus on the growth level there.

Rafael Santana

So let me take that one on the backlog. I think we've continued to grow that in both size and profitability. That certainly matters. But I think coverage is really a critical piece here that means having orders in hand to match what I call our product lead times. So you think about for long lead time products like new locomotives, that means having orders 24, 36 months out. Our teams have done a great job extending that visibility across the product mix. And our coverage right now is the strongest it's ever been. So that's good news. So I think the better news is the continued momentum we continue to see in the pipeline of opportunities. That continues to be very strong. .

Operator

Your next question will come from Bascome Majors with Stephens.

Bascome Majors

It's good to see more of the orders come in for both new locomotives and modernizations across the Class 1 customers after you called out some in the prior quarter. Can you talk about the pipeline specific to North American Class 1? What coverage do you have into next year. How long does this 600 and change of orders sort of extend your visibility into? And what is the pipeline look like and maybe some comments on the Class 1 ordering behavior and how long they would like to be booked out today versus a few years ago as we think about the evolution of that revenue stream into '27, '28, '29.

Rafael Santana

Our coverage, let me just start there. It's the strongest it's ever been. That's good news. I think the better news is that we continue to see momentum and the opportunities here. I was just in Central Asia early this week, and we will continue to expand our fleet here in support of the middle corridor. So that's good news.

In freight and specific, we continue to see alternatives in North America as well. That's customer-specific. At this point, we have not seen what I'll call change in buying behavior associated with the recent carload growth. But again, that's customer-specific. I think more broadly, we continue to have opportunities in Africa, in Asia. And in Transit, I mean, as you see it here in the quarter, that's being led fundamentally by India and Europe. So that continues to be a very strong pipeline, and our teams have had really strong track record here on converting that.

Bascome Majors

Specific to the North American Class I's, can you give us any sense on visibility into that market in coverage? And just any high-level expectations as if that's a growth opportunity into '27 and '28.

Rafael Santana

It is a growth opportunity as we look at it. I think some of it is tied to really the age of the fleet we see the renewal here as really an element of tailwind that's not included in our guidance, and we see that really as an element of opportunity moving forward. So as I highlighted before, we have not seen what I'll call a change in buying behavior. Again, this is very customer specific.

Operator

Next question will come from Angel Castillo with Morgan Stanley.

Angel Castillo Malpica

Congrats on the quarter. Just wanted to expand a little bit more on Integration 3.0 and the portfolio optimization, was hoping you could put a little bit more color or quantitative finer points on portfolio optimization. How much are you kind of delivering this year versus how much you might still kind of have to be delivered here over the next couple of quarters. .

And then, I guess, a notable aspect of Integration 3.0 was just 350 basis points plus of margin improvement, and you've clearly been doing very well in terms of execution on the operational front. So just any incremental kind of finer point you can put on that plus, like how much upside ultimately you're seeing and what you can deliver over your kind of 5-year target?

John Olin

Great, Angel, this is John. Both programs, Integration 3.0 and portfolio optimization are aimed at increasing our overall margin, right? On the integration side, we've talked about these projects for a couple of years. We've moved from the synergies that we got out of GE, the Integration 2.0 and now on Integration 3.0. In July, I liken it to the snowball coming down the hill, right? It's coming down faster and getting bigger. And that's exactly what we're seeing with Integration 3.0, right? The savings are coming in higher than what we expected. The cost is lower to deliver those savings that we saw in Integration 2.0.

And the organization is just in a strong looking at both costs from an everyday continuous improvement standpoint, and also from a more structural standpoint, right, how do we build this or maybe the better term is to eliminate the complexities that we have to drive more efficient business. So we feel that there's still a whole lot of opportunity left there. The formal aspect of that program will end in terms of investment in 1.5 years from now and 2.5 years of savings. But we're already looking at what's next, right?

Portfolio optimization is really taking a look at it in a different way, looking at things that are adding complexity, but aren't adding the profits that we would expect. And with that, even on their best day, they might not be worthy of our ownership at this point. So those we're shedding ourselves, and that's been anywhere between $50 million and $100 million a year. And we're going to continue on that. We still see opportunity to tighten our overall portfolio. So we'll continue on that.

With regards to the 350-plus basis points, we still have a ways to go on that, but I would say that we're off to a very good start. And that's one of the reasons that Plus is there. I think this is a core strength of the company, and we'll continue to work and deliver it. But we see the opportunity on the cost side certainly continuing throughout the remainder of our long-term guidance period.

Angel Castillo Malpica

Helpful. And then, Rafael, I wanted to go back to your commentary around this robust pipeline. And I think you mentioned you're still not seeing perhaps a shift in customer behavior per se. But with the North America traffic or industry, just traffic volumes continue to be up low single digits. I guess what are your conversations like? What are the customers waiting for before you start to see potentially a shift in buying or I guess, appetite for buying more power, ultimately new locomotives. And just ultimately, just how that might convert into kind of backlog? Is it a matter of quarters? Is it a matter of years? And where does diesel kind of play into all of that?

Rafael Santana

I think as customers continue to see those trends remain there, I think there's going to be the opportunity here to relook at really an element of the fleet renewal per se. What we have seen is in the flow part of the business, certainly with the unparking of units, more ordering of parts and that's being reflected in some of the numbers here for the year. So that's something we're continuing to watch out here for the quarter. So that remains as a positive. But I think customers are going to be looking at really the continued trends here on carload growth, and I think there's certainly opportunity when you look at the availability of fleets to move and to support that growth.

Operator

The next question will come from Scott Group with Wolfe Research.

Scott Group

Thanks. So I guess, this year, there's been some degree of like, I guess, transactional headwinds relative to the backlog, so like same-store lagging the backlog a little bit. How should we think about that looking ahead? And I think Rafael you said, North America loco deliveries start growing again next year. Any other puts and takes to think about for '27?

Rafael Santana

Scott, I start with -- we're continuing to accelerate organic revenues in '26 and that's true for both freight and transit. Year-to-date, organic growth, it sits at 5.2%. The execution is strong in the business. We're building momentum -- and we expect that organic growth will be above 5%. That has been captured in the updated guidance we've provided. Our backlog is stronger. We have better coverage with multiyear orders, and those carry higher margins. So I think that's really important to say.

The other element, the highlight here is the acquisition is performing ahead of plan. So that also a positive. So overall, I think it's been a strong year. Teams delivering ahead of plans, and we are really well positioned with the coverage to support the continued execution for the business.

John Olin

Scott, this is John. I would say that the backlog has not been a headwind at all, actually the opposite. And we've been growing in that mid-single-digit range throughout the year. I think where the headwind is, is really on tariffs, right? And we talked about that a little bit earlier, is those headwinds are going to mitigate in the fourth quarter and should be on a year-over-year basis, not a big deal in 2027. So that provides -- that's not a tailwind, but it won't be the headwind that it was. But I think that's the biggest headwind that we've experienced throughout this year.

Scott Group

Sorry if I wasn't correct I mean there has been some like transactional things like the railcar delivery that's not in the backlog or something like that that's...

John Olin

I'm sorry. Yes. About 30% of our revenue is not included in the backlog. And you're absolutely right, Scott. That has been a headwind with the railcars being down projected by the industry to be down about 27%. I think our team in component has done a fantastic job of minimizing that the OE part of the railcar build being down so much after market is doing fine. And then this quarter, maintenance of way was a big contributor to the fact that they were up 5%.

And then our industrial businesses have chugged along over the last, I don't know, 6 to 8 quarters helping to minimize some of that. So yes, we're hoping that as we move forward, that the railcar build will stabilize and start to grow as we get into future periods.

Scott Group

Okay. Yes, that makes sense. That's what I was trying to figure out. And then -- so the other question, I think it's -- we're on track for our third straight year of volume growth for the rail. Some of the rails are getting back to like their highest like volume levels in a decade. Do you think it -- when do you think this starts to sort of matter for either new orders, aftermarket? Is there -- do we still need a few more years of growth before this matters? Or are we getting close?

Rafael Santana

Scott, I think we're seeing that already when it comes down like to flow, which is part to really unpark units or to sustain those levels of unpark. Now with that being said, I think there's an element here of investing in what I call both efficiency with units that are more efficient, more reliable. And I think that's the exact conversation. Those are, again, customer specific. And as I said, we do sit on significant opportunities here in North America, but this is more than North America. The opportunities in North America, we have not accounted in terms of like really a broader fleet renewal program taking place as we look to our guidance. So that would be a tailwind for the business.

Operator

The next question will come from Rob Wertheimer with Melius Research.

Robert Wertheimer

I had a couple of questions outside North America rail, where obviously, you have some strength in mining. I wonder if you might characterize is mining coming back in pockets and big projects you mentioned Simandou? Or is there a broader recovery. And then just in general, Rafael, you characterize international freight is strong for a while on locomotive deliveries. I wonder if you could just talk about where you stand now, what your win rate looks like, looks pretty good and just how you see that market?

Rafael Santana

Okay. Let me start with the last part, which is tied to the international markets. It continues to be a very competitive market. But on the flip side of that, we'll continue to invest in our product I think we're really continuing to extend our technology lead and that's fixed not just to the life cycle cost of our product, but also safety, I mean, efficiency overall. And I think we're continuing to win out there.

In terms of the pockets, I did mention Central Asia here. I think some of the wins we had last year in terms of Kazakhstan that's extending to other parts of the corridor. So that's going to continue to be a significant opportunity for us here and you're going to be hearing back from us on that.

Africa, we continue to see some specific pockets of opportunities. And in Asia, we have that as well. I think on more specifically mining. Well, I think we're seeing that on both. We see that in elements of pockets, but we see that if you think of the ultra-class size trucks as well, those are trucks above the 300-ton range. I think we're very well positioned there. The technology that we've had and that we've led from early on, and we continue to progress there and the trends are positive connected to really some specific commodities.

Operator

The next question will come from Ben Mohr with Citigroup.

Benjamin Mohr Mok

Congrats on the beat and EPS raise. I wanted to focus on the equipment revenue for 3Q. You had mentioned some of that shifted from 3Q to 4Q. And I wanted to just maybe get a sense from you how we should model that going into 4Q kind of coming from both the 3Q stuff that was shifted as well as what would have been in 4Q in the first place.

And I wanted to see if that may have been tied to on Page 5 where you show the Kazakh industry freight volumes year-to-date being down 1.8% and Brazil was also kind of flattish at up 0.1%. Are this -- is the equipment being pushed to 4Q related to some of these country-specific freight volumes?

John Olin

Thanks, Ben. Starting with the second part of that question. No, it has nothing to do with any international or domestic carload movements. I'd say a usual thing to have things move from 1 period to the other. It's not that big of a deal. But in the third quarter, we did see some units move out of the third quarter into the fourth quarter. Nothing from an operational standpoint. I talked about our operational execution has been fine. But at times on the scheduling of a movement of a piece of equipment like that or a customer accepting it, we do see things move from time to time.

So as we look at our own expectations for the third quarter, we came in less than -- revenue growth came in less than expected. But it is simply timing and nothing more, and that's just moved to the fourth quarter. A matter of fact, they're already gone and shipped. So with that, we don't expect any full year impact on that. We raised our guidance in the second quarter by the $110 million to recognize the North American growth of carloads. We're tracking very well to that. The momentum of the business is strong, and we will see versus our expectations, a higher level of revenue in the fourth quarter, driven by it. But we are coming in, right in line with the guidance that we set a quarter ago.

Benjamin Mohr Mok

Wonderful. And related to that, kind of extending to touching on your backlog at your 12-month backlog did step down sequentially, which could imply softer revenues would imply in the next few quarters. But your multiyear backlog stepped up, as has been discussed in the last few questions. So that should drive very strong revenue in the long term. How should we think about modeling your revenue, especially going into 4Q on this point? And because the North American rail carloads strength have been sustained, how should we look at kind of the flow business potentially turning into backlog? And how much should we kind of break that out and just services, equipment digital Intel revenue for 4Q. I understand a lot of it's been overhauls and mods that hit your services, should we see the North America carloads sustained hitting your equipment and your digital Intel as well.

Rafael Santana

Okay. Starting with the backlog, Ben, from a sequential standpoint, it has come down, but it was expected to come down. We are lapping the evident acquisition. And while they don't have a huge concentration of backlog, they did have some backlog. And so that's now pulled out. I think when you take a step back and look at the backlog growth over the last several quarters, it has been in the mid-single-digit range, right?

So acquisitions and currency are making more of the movement between quarters than anything else. And we've had a growth in terms of organic or the organic piece of the 12-month backlog. With regards to the flow business, right, we just talked about, about 30% of our revenue does not fall into a multiyear or a 12-month backlog. It just means the cycle times are quicker. And with that, there's 2 major areas that fall into there. One is the railcar business. And the second one is a lot of the parts businesses for our service side that are not under contract, not under a long-term agreement or MSA.

And so with regards to these really depends on what is under -- well on the service business, the underlying carload growth is a driver of that. And with that, we saw that step up in acceleration in the second quarter, and we've seen that carry forward to the third quarter. And that's manifested in the fact that we've got more locomotives moving active locomotives in North America this quarter versus the year ago quarter. So those things are just stuff that we follow closely, and they're a little bit more nimble in terms of the movement versus the backlog which we have orders for that go out up to several years.

Operator

The next question will come from Jerry Revich with Wells Fargo Securities.

Jerry Revich

I wonder if you could just go back to talk about the long-term margin framework and growth framework. As we think about '27, we should see much higher MOD deliveries for you folks based on major contract ramp. And it sounds like mid-single-digit organic growth is on track. I'm wondering, is there an opportunity for margin expansion in '27 to be higher than the 70 basis points of operating improvement that you folks typically target given the mix. Can you just comment on the puts and takes as we think about from a high level margins?

John Olin

Yes. Jerry. So it's a little bit early to talk about '27. But when we look at the construct, as we move out of '26 in terms of margin, it's going to relatively similar to what we've seen in the past and what we've got in that 350-plus basis points in terms of the elements. And we would expect about 2/3 of it to come from the cost side. And we just talked about that things are going very well. We continue to come in higher than expected. So we feel great about that. And the pool of opportunity, it seems that the more we deliver, the more we find out we've got or find out how to get at it. And so that bucket doesn't seem to be going down. And it will provide a lot of opportunity going forward.

The other 1/3 of it is on delivering innovative products that we can get the value for. And we've got a lot in our pipeline. We haven't talked much on this call, but our innovation continues to be very, very strong. And we'll see some of that transact as we go forward. But in terms of specifics, we would expect margin growth certainly in 2027, but a little bit early to talk about the magnitude of that, Jerry.

Jerry Revich

Thank you John, and then separately, Rafael, can we just expand on the international pipeline? When do you expect to see the inquiries turn into bookings based on the cadence? And can you comment on the opportunity set in Argentina specifically? Could that be a meaningful part of the opportunity set as you look out over the next 12 months?

Rafael Santana

Yes. We are -- again, as I look at the various opportunities, I mean, there's certainly, I think, some pockets and markets to highlight Africa continues to be one of those. I think you're still looking at some sizable opportunities there. I didn't bring in Central Asia as we do expect opportunities here also for sizable growth I think in Asia, some of those opportunities continue. And you're going to see that converting the next -- into the future here.

But it's a strong pipeline of opportunities. The momentum is there. I need to mention here in North America where we certainly have opportunities too. So I think that's the positive side of it. It's not concentrated on a single customer or a single market. I think the trends remain there, and they do support a strong pipeline of opportunities to our team. Happy to have a strong track record here in converting. So I feel positive about the opportunity to continue to expand.

Jerry Revich

But Argentina and South America specifically, can you comment on your level of optimism there? That meaningful .

Rafael Santana

I think we're well positioned in South America certainly had a strong, call presence there a -- we've made, I think, some significant progress even on some markets with smaller orders Argentina, it is a market that we have installed base, and we're well positioned here for the discussions that are taking place in the South America market, where it's associated with new concessions, expansion of new concessions I'm not going to discuss any specific opportunities here, but we certainly feel very strong about presence we have into that market.

Operator

The next question will come from Tami Zakaria with JPMorgan.

Tami Zakaria

I had a question regarding your very strong margin performance in the quarter. And I think you said it was better than expected. So are you able to rank the different drivers in terms of magnitude coming from Integration 3.0 versus portfolio optimization versus product mix, I think that would be helpful.

John Olin

Well, as a broader bucket, Tami, certainly, under the banner that I called out in terms of operational excellence, that was the biggest driver. That was the biggest driver on a year-over-year basis, and it was the biggest driver over our expectation. We haven't quantified the differences between lean, everyday continuous improvement and Integration 3.0. And then again, there was some portfolio optimization in there. But that is really the piece that is driving faster and harder than anything else during the quarter. Again, mix came in favorable as well. That would be lesser certainly to the operational excellence. Also things fixed cost absorption is a benefit when we're growing revenue at 8%, not needing to add additional assets to do that or fixed costs to do that. So all of that was contributing, but the biggest one really was on the cost side and the discipline that we've got coming from on our plants around the world.

Tami Zakaria

Understood. And then do you currently have a view of what real car build or deliveries could look like next year after about 23,000 this year in North America? And how does that inform your view of the Components segment growth in the next few quarters after a very strong 5%, is 5% sort of -- or mid-single digit the new normal for the Components segment for the next few quarters?

John Olin

Get me a couple of comments there. That's something we're certainly watching very carefully, especially for the quarter. That's one of the things that could move numbers. We do expect to be hitting an inflection point here for the year. And as we go into 2027, I think industry forecast is really to be going up back to really 2025 number, still well below here the replacement ratio. .

Operator

The next question is a follow-up from Bascome Majors with Stephens.

Bascome Majors

And I know we'll hear your next year view in February in due time here. But big picture, as you look out over the next 2 to 3 years, do you see more opportunity to sort of gradually accelerate the organic growth trajectory of the business? Or is it really more about executing on the really fine margin expansion that you guys have been delivering here?

Rafael Santana

I think it's both plus some, and I'll start with the fundamentals of the business being strong. I think we are winning both in North America and international, certainly in freight and transit I think we've extended the order coverage while improving really the quality of the backlog. The execution is strong with on-time delivery. We're continuing to see opportunities to drive both productivity, simplification, efficiency across the business.

I think we're very happy on how we're extending the technology leads through automation, best-in-class gains and efficiency, safety, life cycle cost. So I think there's opportunities here not to only keep growing our installed base but to ultimately really help our customers improve the return on investments on really updating and modernizing their fleets. Fleets that are over 20 years old. And just keep in mind the dynamics of obsolescence. I've talked to you about electronics that is coming to play in a big way, and that's a function of really having to update units, and you will update them so you can have gains in efficiency and safety in a number of fronts.

So I think we see it here an opportunity with technology to accelerate that growth. And of course, as you think beyond organic growth, I think we stand on some significant opportunities to also look at inorganic plays, and we do have a good pipeline. So all in all, I think the fundamentals of the business are strong. Our portfolio is more resilient, and we're highly confident in our ability to deliver on the long-term guidance.

Bascome Majors

Thank you Rafael. I could just add one more clarifying question. Can you update us on the regulatory framework and review of Zero-to-Zero and if we're at a point where that could become a tactical revenue driver for the business in the next couple of quarters?

Rafael Santana

Just continue to progress. We're expecting FRA approval on that. And I think you'll be hearing on that.

Operator

The next question is another follow-up from Ken Hoexter with Bank of America.

Ken Hoexter

Thanks for the update on Zero-to-Zero. Definitely look to hear more. The competitive market, last -- I guess a few quarters ago, we had heard orders from maybe a dormant competitor now getting back in the market. Are we seeing that competitive market increasing at all for domestic locomotives. I just want to see if there was any follow-on or completion to that order and if you're seeing that in the market.

Rafael Santana

It remains a competitive market out there, Ken. What I would say is we're continuing to extend our technology lead and that has to do with the investments we've made in technology. And it's not just at the product level, if you think about automation, best-in-class gains that ultimately translate into not just life cycle cost, safety and efficiency. So if anything, we are committed to continue to extend that technology which positions the business very well to continue winning out there, and that's what we're saying.

Operator

And this will end our question-and-answer session. I would like to turn the conference back over to Ms. Kyra Yates for any closing remarks. Please go ahead. .

Kyra Yates

Thank you, Chuck, and thank you, everyone, for your participation today. We look forward to speaking with you again next quarter. Have a great day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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