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Woodward (WWD) Beats on Q3 Earnings Despite Lower Revenues

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Woodward, Inc. (WWD - Free Report) reported unimpressive third-quarter fiscal 2020 results, with net earnings and sales declining on a year-over-year basis. The Fort Collins, CO-based company witnessed severe volatility in its markets stemming from the COVID-19 pandemic.

Net Income

On a GAAP basis, net earnings in the quarter amounted to $38.5 million or 61 cents per share compared with $66.1 million or $1.02 per share in the year-ago quarter.

Adjusted net earnings were $30.7 million or 48 cents per share compared with $83.9 million or $1.30 per share in the prior-year quarter. Nevertheless, the bottom line beat the Zacks Consensus Estimate by 14 cents.

Woodward, Inc. Price, Consensus and EPS Surprise Woodward, Inc. Price, Consensus and EPS Surprise

Woodward, Inc. price-consensus-eps-surprise-chart | Woodward, Inc. Quote

Revenues

Net sales in the June-end quarter fell 30.3% year over year to $523.8 million due to lower sales in the Aerospace and Industrial segments. Nevertheless, the top line surpassed the consensus estimate of $513 million.

Excluding renewable power systems and related businesses (“RPS”), which were divested on Apr 30, net sales for the quarter would have been $516 million compared with $729 million in the prior-year quarter.

Segment Results

Aerospace: Net sales tumbled 38.6% year over year to $306.5 million. This was a result of lower commercial sales due to the decline in global passenger traffic and OEM production rates and plant closures. The segment continues to benefit from a strong defense market, which softened the significant impact of the rapid reduction in passenger traffic and aircraft production rates. The segment’s earnings amounted to $41.1 million, down from $103.2 million in the year-ago quarter. The downside was caused by lower sales volume, partially offset by cost reduction initiatives.

Industrial: Net sales totaled $217.3 million, down 14.2% year over year. The downside was due to the impact of COVID-19 across the company’s markets, weakness in oil and gas as well as the divestiture of RPS. While results were affected by the economic slowdown, the divestiture of the renewables portfolio enhanced the segment’s profitability. The segment’s earnings were $27.4 million, up from $26.2 million in the year-ago quarter.

Other Details

Total expenses declined to $478.8 million from $659.7 million year over year primarily due to the lower cost of goods sold. Adjusted EBITDA came in at $83.7 million compared with $142.8 million in the year-ago quarter.

Cash Flow & Liquidity

In the first nine months of fiscal 2020, Woodward generated $212.4 million of net cash from operating activities compared with $219.2 million in the year-ago period. For the same period, free cash flow was $173 million compared with $141 million in the prior-year period. As of Jun 30, the company had $101.4 million in cash and cash equivalents with $729.2 million of long-term debt.

Outlook

Due to economic disruptions stemming from the COVID-19 crisis, Woodward did not provide any specific guidance for fiscal 2020. However, it anticipates results in fiscal fourth-quarter to be similar to that in fiscal third-quarter.

Zacks Rank & Stocks to Consider

Woodward has a Zacks Rank #5 (Strong Sell), at present.

Some better-ranked stocks in the broader industry are Turtle Beach Corporation (HEAR - Free Report) , Plantronics, Inc. and Clearfield, Inc. (CLFD - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Turtle Beach has a trailing four-quarter earnings surprise of 46.4%, on average.

Plantronics has a trailing four-quarter earnings surprise of 540%, on average. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.

Clearfield has a trailing four-quarter earnings surprise of 45.6%, on average. The company’s earnings topped the consensus estimate in two of the last four quarters.

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