Woodward(US:WWD)2025-11-24 23:02Financial Data and Key Metrics Changes - Annual revenue exceeded $3.5 billion for the first time, marking a record performance [5] - Adjusted earnings per share increased nearly 13% compared to the prior year [6] - Net sales for Q4 2025 totaled $995 million, a 16% increase, while net sales for the full year reached $3.6 billion, a 7% increase [17] - Earnings per share for Q4 2025 were $2.23 compared to $1.36, and adjusted earnings per share were $2.09 compared to $1.41 [17] Business Line Data and Key Metrics Changes - Aerospace sales increased 14% to record levels, with margin expansion of 290 basis points [6] - Industrial segment sales for Q4 were $334 million, up 11%, with core industrial sales growing 15% [20] - Commercial services sales in the aerospace segment increased 40%, while defense OEM sales rose 27% [18] - Industrial segment earnings for Q4 were $49 million, or 14.6% of segment sales, compared to $38 million, or 12.6% of segment sales [21] Market Data and Key Metrics Changes - Aerospace segment sales for the full year were $2.3 billion, up 14%, driven by strong demand in commercial services and defense OEM [18] - Industrial sales anticipated to grow across all primary markets, with power generation growth expected to be muted in the first half of 2026 due to divestiture impacts [26][27] - China on-highway sales in 2026 expected to be approximately $60 million, in line with 2025 [27] Company Strategy and Development Direction - Company focuses on strong execution, capturing growth in markets, and driving operational excellence [15] - Strategic investments in automation and new facilities to support long-term growth [11][24] - Continued emphasis on innovation and partnerships to enhance technology solutions [14] Management's Comments on Operating Environment and Future Outlook - Management expects sustained demand across core markets, with a modest adjustment to cumulative free cash flow target due to increased capital allocation towards growth investments [16] - Anticipated strong repair growth for LEAP and GTF engines, with expectations for LEAP and GTF repair revenue to surpass legacy repair revenue by late 2026 or early 2027 [8][15] - Management remains confident in the growth trajectory across segments, with guidance for 2026 reflecting continued operational discipline [16][26] Other Important Information - Capital expenditures for 2025 were $131 million, driven by investments in automation and new facility construction [24] - New three-year share repurchase program authorized for up to $1.8 billion, reflecting confidence in the company's strategy and growth outlook [25] Q&A Session Summary Question: What growth is expected for legacy narrowbody engine aftermarket in 2026? - Management expects single-digit growth rates for legacy narrowbody engines in 2026, with some price increases anticipated [42][44] Question: How much of the current power generation revenue is tied to Caterpillar? - Management indicated healthy growth from power generation customers, including Caterpillar, but did not specify exact revenue figures [47][49] Question: What are the assumptions for OE de-stocking? - Management anticipates de-stocking could occur by the second quarter of fiscal year 2026 if airframe and engine customers meet forecasted rates [81][82] Question: Will capital expenditures normalize after the A350 build-out? - Management indicated that the Spartanburg investment is causing a peak in capital expenditures, with future investments being evaluated [90] Question: How should shareholders expect the return of capital to be distributed? - Management plans to spread the return of capital evenly throughout the year [111]