Woodward, Inc. (WWD) Earnings & Analysis

Latest quarter

Woodward’s third-quarter revenue missed the consensus, while adjusted earnings per share of $2.52 exceeded the $2.39 consensus. The company reported revenue of $1.1 billion, up from $915.4 million a year earlier, and diluted earnings per share of $2.40, compared with $1.76.

The filing attributed sales growth in both Aerospace and Industrial primarily to higher volumes and price realization. Woodward said commercial aircraft production and repair activity supported Aerospace sales, while data center power demand, marine transportation and liquefied natural gas infrastructure contributed to Industrial growth. Defense original-equipment sales fell, primarily because of a one-time revenue recognition adjustment.

Gross margin rose to 31.5% from 27.2%, which the filing attributed primarily to higher volumes and price realization. Operating margin increased to 16.7% from 13.0%. Woodward reported free cash flow of $87.1 million, down from $99.1 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Chip Blankenship said customer demand continued across Aerospace and Industrial, with commercial aircraft production and services contributing to growth. In questions about services demand, he said repair inputs from airline customers and other maintenance shops were steady to increasing for newer engine programs and steady for legacy, widebody and regional aircraft.

CFO Bill Lacey said pricing actions and higher sales volumes helped expand segment margins. Aerospace’s third-quarter margin included a one-time retroactive pricing adjustment that contributed approximately 100 basis points, he said. Asked about Industrial margins, Lacey said product and business mix had been favorable during the quarter; he expected core Industrial earnings to return to the levels seen in the first half as a business line with a less favorable mix recovered.

Blankenship said Woodward had completed an expansion of its industrial fuel-injection capacity in Germany, supporting power-generation demand. Asked about data centers, he said Woodward was discussing customers’ demand forecasts and the associated risks with them before allocating capital. Lacey said higher inventory supported demand and that receivables were above expectations because of collection timing.

On manufacturing investment, Blankenship said automation was intended to expand capacity and productivity while reducing future hiring needs. Woodward was targeting approximately 1,000 fewer incremental hires by 2029, though he said the company would continue hiring for growth and attrition.

Asked about supply constraints, Blankenship identified castings, forgings and rare earth metals as industry challenges. He said Woodward was redesigning some parts to use machined billet and operating rapid-response centers to help suppliers.

For the quarter ahead, Lacey expected spare component demand to remain elevated but ease slightly from the third quarter. Blankenship said it was premature to guide fiscal 2027 earnings growth while Woodward developed its annual operating plan.

Guidance

Woodward raised its fiscal 2026 adjusted earnings-per-share guidance to $9.30–$9.50. It also changed its Aerospace sales-growth outlook to 21.0%–23.0% and expects Aerospace segment earnings of approximately 23.5% of sales.

For Industrial, Woodward raised its sales-growth outlook to 19.0%–21.0% and expects segment earnings of approximately 19.0% of sales. The company now expects an adjusted effective tax rate of approximately 22.5%.