A month has gone by since the last earnings report for Woodward (WWD - Free Report) . Shares have added about 9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Woodward due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Woodward Beats on Q3 Earnings Despite Lower Revenues
Woodward reported unimpressive third-quarter fiscal 2020 results, with net earnings and sales declining on a year-over-year basis. The company witnessed severe volatility in its markets stemming from the COVID-19 pandemic.
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.
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.
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.
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.
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.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 10.7% due to these changes.
At this time, Woodward has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Woodward has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.