Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in WWD over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. This text ...

Company Overview - Woodward shares have increased by approximately 18.2% since the last earnings report, outperforming the S&P 500 [1] - Recent estimates for Woodward have trended upward over the past month [2] Performance Metrics - Woodward has a subpar Growth Score of D and a Momentum Score of F, while it holds a Value Score of C, placing it in the middle 20% for this investment strategy [3] - The aggregate VGM Score for Woodward is F, indicating a lack of focus on any single investment strategy [3] Outlook - The overall direction of estimate revisions for Woodward has been upward, with a net zero magnitude of changes, leading to a Zacks Rank of 2 (Buy) [4] - An above-average return is expected from Woodward in the upcoming months [4] Industry Comparison - Woodward is part of the Zacks Aerospace - Defense Equipment industry, where Hexcel (HXL) has gained 6.2% over the past month [5] - Hexcel reported revenues of $456.5 million for the last quarter, reflecting a year-over-year decline of 3.4% [5] - Hexcel's expected earnings for the current quarter are $0.50 per share, indicating a 16.7% decrease from the previous year, with a Zacks Rank of 4 (Sell) [6]

Group 1 - Momentum investing involves following a stock's recent trend, with the aim of buying high and selling higher, capitalizing on established price movements [1] - Woodward (WWD) currently holds a Momentum Style Score of B and a Zacks Rank of 2 (Buy), indicating potential for outperformance [2][3] - Stocks rated Zacks Rank 1 (Strong Buy) and 2 (Buy) with Style Scores of A or B tend to outperform the market over the following month [3] Group 2 - WWD shares have increased by 6.63% over the past week, outperforming the Zacks Aerospace - Defense Equipment industry, which rose by 4.95% [5] - Over the last quarter, WWD shares rose by 5.34%, and over the past year, they increased by 10.85%, while the S&P 500 saw declines of -5.82% and a modest gain of 9.94% respectively [6] - The average 20-day trading volume for WWD is 478,629 shares, indicating a bullish sign when combined with rising stock prices [7] Group 3 - The Zacks Momentum Style Score incorporates trends in earnings estimate revisions alongside price changes, which are crucial for assessing stock potential [8] - In the past two months, four earnings estimates for WWD have been revised upwards, raising the consensus estimate from $6.14 to $6.21 [9] - For the next fiscal year, three estimates have increased while one has decreased, reflecting a generally positive outlook [9] Group 4 - Given the positive momentum indicators and earnings outlook, WWD is positioned as a 2 (Buy) stock with a Momentum Score of B, making it a strong candidate for near-term investment [11]

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents Woodward's unaudited financial statements, management's analysis, market risk disclosures, and internal controls [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Woodward's unaudited condensed consolidated financial statements, including earnings, balance sheets, and cash flows [Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Condensed consolidated financial statements show **5.8% net sales growth** to **$883.6 million**, **$108.9 million** net earnings, and **$4.49 billion** total assets Condensed Consolidated Statements of Earnings (Q2 FY2025 vs Q2 FY2024, in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net sales | $883,629 | $835,343 | | Earnings before income taxes | $132,963 | $120,624 | | Net earnings | $108,949 | $97,556 | | Diluted earnings per share | $1.78 | $1.56 | Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total current assets | $1,911,937 | $1,743,611 | | Total assets | $4,493,469 | $4,368,915 | | Total current liabilities | $979,717 | $923,510 | | Total liabilities | $2,155,962 | $2,192,499 | | Total stockholders' equity | $2,337,507 | $2,176,416 | Condensed Consolidated Statements of Cash Flows (Six Months Ended, in thousands) | Metric | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $112,341 | $144,118 | | Net cash (used in) investing activities | $(4,138) | $(49,641) | | Net cash (used in) provided by financing activities | $(17,602) | $80,588 | | Net change in cash and cash equivalents | $81,871 | $179,485 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, segment performance, and key events including the Safran acquisition and a product line divestiture - On December **19**, **2024**, Woodward entered into a definitive agreement to acquire the Safran Electronics & Defense electromechanical actuation business in the US, Mexico, and Canada, with the acquisition expected to close in the second half of fiscal year **2025**[65](index=65&type=chunk) - During the first six months of fiscal **2025**, the company sold certain product lines, including its heavy-duty gas turbine combustion parts product line, for cash proceeds of **$44.9 million** and recognized a pretax gain of **$20.5 million**[67](index=67&type=chunk) Revenue by Segment (Six Months Ended March 31, in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Aerospace | $1,055,611 | $958,268 | | Industrial | $600,743 | $663,805 | | **Total net sales** | **$1,656,354** | **$1,622,073** | Segment Earnings (Six Months Ended March 31, in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Aerospace | $219,341 | $177,453 | | Industrial | $86,164 | $132,125 | | Nonsegment expenses | $(48,856) | $(59,034) | | **Consolidated earnings before income taxes** | **$234,817** | **$230,344** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 and first-half fiscal **2025** financial results, highlighting segment performance, liquidity, and capital resources [Overview](index=32&type=section&id=Overview) Q2 FY**2025** consolidated net sales rose **5.8%** to **$883.6 million**, driven by Aerospace growth, with **$108.9 million** net earnings Q2 FY2025 Financial Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Consolidated Net Sales | $883,629 | $835,343 | | Aerospace Segment Sales | $561,729 | $497,512 | | Industrial Segment Sales | $321,900 | $337,831 | | Consolidated Net Earnings | $108,949 | $97,556 | | Consolidated Diluted EPS | $1.78 | $1.56 | - Free cash flow for the first half of fiscal year **2025** was **$60.4 million**, down from **$87.8 million** in the same period of **2024**, mainly due to an increase in working capital, offset by lower capital expenditures[132](index=132&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Consolidated net sales increased due to Aerospace growth, offset by Industrial declines, with gross margin decreasing from unfavorable product mix Consolidated Net Sales Change Breakdown (Q2 FY2025 vs Q2 FY2024, in thousands) | Component | Change (in thousands) | | :--- | :--- | | Net Sales, Q2 2024 | $835,343 | | Aerospace volume | $22,083 | | Industrial volume | $(26,528) | | Effects of changes in price | $59,320 | | Effects of changes in foreign currency rates | $(6,589) | | **Net Sales, Q2 2025** | **$883,629** | - Gross margin decreased to **27.2%** for Q2 **2025** from **28.1%** in Q2 **2024**, primarily due to unfavorable product mix, which was partially offset by price realization[141](index=141&type=chunk) - The company anticipates continued significant sales and earnings decreases in its China on-highway natural gas truck business in fiscal year **2025** compared to **2024**, with future demand remaining uncertain[137](index=137&type=chunk) [Aerospace Segment](index=36&type=section&id=Aerospace%20Segment) Aerospace segment net sales increased **12.9%** to **$561.7 million** in Q2 **2025**, with earnings up **26.6%** to **$124.6 million** Aerospace Segment Performance (Q2 FY2025 vs Q2 FY2024, in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Sales | $561,729 | $497,512 | | Segment Earnings | $124,616 | $98,451 | | Segment Margin | **22.2%** | **19.8%** | - Commercial aftermarket sales increased due to high aircraft utilization rates, while commercial OEM sales saw a measured ramp following the Boeing work stoppage[153](index=153&type=chunk) - Defense OEM sales increased due to higher demand for smart defense, while defense aftermarket sales were down in the quarter[154](index=154&type=chunk) [Industrial Segment](index=37&type=section&id=Industrial%20Segment) Industrial segment net sales fell **4.7%** to **$321.9 million** in Q2 **2025**, with earnings down **29.5%** to **$46.0 million** due to lower China on-highway truck volume Industrial Segment Performance (Q2 FY2025 vs Q2 FY2024, in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Sales | $321,900 | $337,831 | | Segment Earnings | $45,967 | $65,244 | | Segment Margin | **14.3%** | **19.3%** | - The decrease in sales and earnings was primarily attributable to lower China on-highway volume and unfavorable mix, partially offset by price realization[158](index=158&type=chunk) - Future demand in the on-highway natural gas truck business in China remains uncertain due to the volatility of this business[161](index=161&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) Woodward maintains strong liquidity with **$364.1 million cash**, **$731.0 million** available credit, and **$911.9 million** total debt - As of March **31**, **2025**, the company had total outstanding debt of **$911.9 million** and additional borrowing availability of **$731.0 million** under its revolving credit facility[133](index=133&type=chunk)[166](index=166&type=chunk) - Net cash from operating activities decreased to **$112.3 million** in the first half of FY**2025** from **$144.1 million** in the prior year, primarily due to an increase in working capital[173](index=173&type=chunk) - Financing activities used **$17.6 million** in cash in the first half of FY**2025**, compared to providing **$80.6 million** in the prior year, mainly due to **$79.5 million** in common stock repurchases and lower net debt borrowings[175](index=175&type=chunk) Free Cash Flow Reconciliation (Six Months Ended March 31, in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities (U.S. GAAP) | $112,341 | $144,118 | | Payments for property, plant and equipment | $(51,990) | $(56,301) | | **Free cash flow (Non-U.S. GAAP)** | **$60,351** | **$87,817** | [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk exposures, including interest rates, foreign currency, and raw material costs, remain unchanged from prior Form **10**-K disclosures - Market risks related to interest rates, foreign currency exchange, and raw material costs have not materially changed since the company's last annual report on Form **10**-K[195](index=195&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded disclosure controls were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March **31**, **2025**[197](index=197&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter ended March **31**, **2025**, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[198](index=198&type=chunk) [PART II – OTHER INFORMATION](index=44&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, other information, and exhibits filed with the report [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) Woodward is involved in various legal proceedings, which management believes will not materially impact financial condition or operations - Management believes that any liabilities resulting from pending claims, legal proceedings, and investigations will not materially affect Woodward's liquidity, financial condition, or results of operations[201](index=201&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the most recent Annual Report on Form **10**-K have occurred - The risk factors disclosed in the most recent Form **10**-K have not materially changed[202](index=202&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's equity repurchases during the quarter under the **$600 million** stock repurchase program - In January **2024**, the Board authorized a three-year program for the repurchase of up to **$600 million** of Woodward's common stock[207](index=207&type=chunk) Issuer Purchases of Equity Securities (January - March 2025) | Period | Total Shares Purchased | Weighted Average Price Paid Per Share | Approx. Dollar Value Remaining for Purchase (in thousands) | | :--- | :--- | :--- | :--- | | Jan 2025 | 81,176 | $172.27 | $159,750 | | Feb 2025 | 81,082 | $190.75 | $144,292 | | Mar 2025 | 81,037 | $180.21 | $129,689 | [Other Information](index=44&type=section&id=Item%205.%20Other%20Information) Three executive officers, including the CEO, established Rule **10**b**5**-**1** trading plans during the second quarter - Three officers, including the CEO, entered into trading plans pursuant to Rule **10**b**5**-**1** during the quarter[205](index=205&type=chunk) - On February **10**, **2025**, CEO Charles Blankenship, Jr. established a plan for the exercise of up to **49,072** stock options and the sale of up to an additional **8,378** shares, terminating in November **2025**[206](index=206&type=chunk) [Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form **10**-Q, including officer certifications and Inline XBRL financial data - The exhibits filed with the report include Rule **13**a-**14**(a)/**15**d-**14**(a) certifications from the CEO and CFO, Section **1350** certifications, and financial statements formatted in Inline XBRL[213](index=213&type=chunk)[217](index=217&type=chunk)

Core Insights - Woodward, Inc. (WWD) reported second-quarter fiscal 2025 adjusted net earnings per share (EPS) of $1.69, a 4.3% increase year over year, exceeding the Zacks Consensus Estimate by 17.4% [1] - Quarterly net sales rose 5.8% year over year to $883.6 million, surpassing the consensus estimate by 6.4% [1] - The company raised the lower end of its sales and earnings guidance, reflecting confidence in navigating tariffs and current market conditions [2] Financial Performance - Aerospace segment net sales reached $561.7 million, up 12.9% year over year, driven by strong defense demand and a robust commercial after-market [3] - Defense OEM sales increased 52% to $138 million, while commercial after-market sales grew 23% [4] - Industrial segment net sales totaled $321.9 million, down 4.7% year over year, with transportation sales declining 18% due to a drop in China on-highway sales [5][6] Earnings and Margins - Segmental earnings for Aerospace were $125 million, up from $98 million a year ago, primarily driven by price realization and higher volumes [4] - Industrial segment earnings declined to $46 million from $65 million in the year-ago quarter, affected by lower China on-highway volume [7] - Gross margin decreased by 90 basis points year over year to 27.2% [8] Cash Flow and Shareholder Returns - As of March 31, 2024, WWD had $364.1 million in cash and cash equivalents and $489.8 million in long-term debt [11] - The company generated $78 million of net cash from operating activities, down from $97 million in the prior-year period [11] - Free cash flow was $59 million compared to $83 million in the year-ago period, with $61 million returned to shareholders through dividends and share repurchases [12] Fiscal 2025 Guidance - WWD raised the lower end of its sales guidance to between $3,375 million and $3,500 million, and adjusted EPS guidance to range from $5.95 to $6.25 [14] - Aerospace segment revenues are expected to increase by 8-13%, while industrial segment revenues are anticipated to decline by 7-9% [15]

Financial Data and Key Metrics Changes - Woodward's net sales increased by 6% year over year, reaching $884 million in the second quarter of fiscal year 2025, while adjusted earnings per share rose by 4% to $1.69 [7][20] - Net cash provided by operating activities for the first half of fiscal year 2025 was $112 million, down from $144 million in the previous year, with free cash flow at $60 million compared to $88 million [20][21] - Debt leverage as of March 31, 2025, was 1.5x EBITDA [21] Business Line Data and Key Metrics Changes - Aerospace segment sales increased by 13% to $562 million, with defense OEM sales up 52% and commercial aftermarket sales up 23% [23][24] - Industrial segment sales decreased by 5% to $322 million, with transportation down 18% due to a decline in China on highway sales, while core industrial sales excluding this segment rose by 11% [25][26] Market Data and Key Metrics Changes - China on highway sales were $21 million, a decrease of $45 million from the prior year, indicating subdued demand in that market [25] - The aerospace market outlook remains bullish despite concerns about soft forward bookings in the U.S. and some international routes [10][11] Company Strategy and Development Direction - The company is focused on organic growth, returning cash to stockholders, and pursuing strategic mergers and acquisitions [21][22] - Woodward's lean transformation efforts have led to operational improvements and increased output in various gas turbine systems [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term prospects despite potential risks from tariffs and economic downturns, reaffirming the top end of their guidance [17][18] - The company is closely monitoring early indicators from end markets and customer forecasts to mitigate potential impacts from tariffs and trade tensions [16] Other Important Information - The company achieved record sales in aerospace, with the highest segment earnings recorded at $125 million and margins expanding to 22.2% [24] - Woodward's production footprint and supply base strategy result in less exposure to tariffs compared to other aerospace and industrial companies [15] Q&A Session Summary Question: Can you further decompose the commercial aftermarket growth in the quarter? - The growth was broad-based, with a notable increase in spare parts orders from MRO facilities contributing to the 23% growth [32] Question: What is the backlog in marine transportation? - The OE backlog is extended into 2029, but trade tensions could impact fleet utilization [34] Question: Given trade tensions, does it make sense to find a different owner for the China on highway product line? - The company is continuously examining its portfolio but has no immediate comments on potential actions [41] Question: What is the outlook for the commercial OE side? - The company is in close contact with Boeing and is meeting order rates, with a positive outlook for the program [43] Question: What drove the 52% increase in defense OE growth? - The increase is largely attributed to smart defense programs, with overall good health in other programs as well [94]

Financial Performance - Second Quarter Fiscal Year 2025 net sales increased by 6% year-over-year, reaching $884 million compared to $835 million in Q2 FY24[15] - Adjusted net earnings increased by 3% year-over-year, from $101 million in Q2 FY24 to $103 million in Q2 FY25[15] - Free cash flow decreased by 28% to $59 million in Q2 FY25, compared to $83 million in Q2 FY24[15] - Adjusted Earnings Per Share (EPS) increased by 4% to $1.69 in Q2 FY25, compared to $1.62 in Q2 FY24[15] - Year-to-date free cash flow decreased by 31% to $60 million, compared to $88 million in the same period last year[17] Segment Performance - Aerospace segment sales increased by 13% in Q2 FY25, reaching $562 million compared to $498 million in Q2 FY24[28] - Aerospace segment earnings increased by 27% with a margin increase of 240 bps, reaching 22.2%[28] - Industrial segment sales decreased by 5% in Q2 FY25, totaling $322 million compared to $338 million in Q2 FY24[41] - Core Industrial sales increased by 11% in Q2 FY25, reaching $301 million compared to $272 million in Q2 FY24[43] - China on-highway natural gas truck sales decreased from $65.967 million to $20.916 million for the three months ended March 31, 2024 and 2025 respectively[75] Fiscal Year 2025 Guidance - The company revised its full-year sales guidance to $3.375 billion - $3.5 billion, from the previous $3.3 billion - $3.5 billion[56] - The company maintains its adjusted EPS guidance to $5.95-$6.25[56]

For the quarter ended March 2025, Woodward (WWD) reported revenue of $883.63 million, up 5.8% over the same period last year. EPS came in at $1.69, compared to $1.62 in the year-ago quarter.The reported revenue represents a surprise of +6.43% over the Zacks Consensus Estimate of $830.26 million. With the consensus EPS estimate being $1.44, the EPS surprise was +17.36%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their ...

Company Performance - Woodward reported quarterly earnings of $1.69 per share, exceeding the Zacks Consensus Estimate of $1.44 per share, and up from $1.62 per share a year ago, adjusted for non-recurring items [1] - The earnings surprise for this quarter was 17.36%, following a previous quarter where earnings of $1.35 per share surpassed expectations of $1.14 per share by 18.42% [2] - The company achieved revenues of $883.63 million for the quarter, surpassing the Zacks Consensus Estimate by 6.43%, compared to $835.34 million in the same quarter last year [3] Stock Performance - Woodward shares have increased approximately 9.3% since the beginning of the year, contrasting with a decline of 6.1% in the S&P 500 [4] - The current consensus EPS estimate for the upcoming quarter is $1.61, with expected revenues of $873.55 million, and for the current fiscal year, the EPS estimate is $6.13 on revenues of $3.39 billion [8] Industry Outlook - The Aerospace - Defense Equipment industry, to which Woodward belongs, is currently ranked in the top 12% of over 250 Zacks industries, indicating a favorable outlook [9] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Woodward's stock performance [6]

Financial Data and Key Metrics Changes - Woodward's net sales increased by 6% year over year, reaching $884 million, while adjusted earnings per share rose by 4% to $1.69 [9][21] - Net cash provided by operating activities for the first half was $112 million, down from $144 million, and free cash flow decreased to $60 million from $88 million [21][22] - Debt leverage as of March 31, 2025, was 1.5x EBITDA [22] Business Line Data and Key Metrics Changes - Aerospace segment sales increased by 13% to $562 million, with defense OEM sales up 52% and commercial aftermarket sales up 23% [24] - Industrial segment sales decreased by 5% to $322 million, with transportation down 18% due to a decline in China On Highway sales [27] - Core industrial sales, excluding China On Highway, increased by 11% [27] Market Data and Key Metrics Changes - China On Highway sales were $21 million, a decrease of $45 million from the prior year [27] - The aerospace market outlook remains bullish despite concerns about soft forward bookings in the U.S. and some international routes [12][15] Company Strategy and Development Direction - The company is focused on lean transformation and operational excellence to support growth in aerospace and industrial segments [10][13] - Woodward is actively monitoring tariff impacts and managing supply chain disruptions while maintaining a localized production strategy to mitigate risks [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term prospects and reaffirmed guidance for revenue and adjusted EPS, reflecting strong first-half performance [19][20] - Concerns were raised about potential impacts from tariffs and economic downturns, but the company remains optimistic about defense OE growth [15][20] Other Important Information - The company plans to return approximately $215 million to stockholders in 2025, including $150 million in share repurchases and $65 million in dividends [23] - The Micronet platform for advanced turbine control systems was highlighted as a key innovation milestone [13][14] Q&A Session Summary Question: Can you further decompose the commercial aftermarket growth in the quarter? - Management noted that growth was broad-based, with a significant contribution from spare parts orders to MRO facilities [34] Question: How far does the backlog run in marine transportation? - The backlog is extended into 2029, but trade tensions could impact fleet utilization [37] Question: Given trade tensions, does it make sense to find a different owner for the China On Highway product line? - Management is continuously evaluating the portfolio but has no immediate comments on potential actions [45] Question: What drove the 52% increase in defense OE growth? - The increase was largely attributed to smart defense programs and overall health in other programs [98] Question: What is the latest full-year China On Highway expectation? - The expectation has been raised to around $50 million due to better-than-expected Q2 performance [72] Question: How is the tariff impact embedded into guidance? - The company anticipates $10 to $15 million of pressure from tariffs, which has been factored into the updated guidance [96]