It has been about a month since the last earnings report for Woodward (
WWD Quick Quote WWD - Free Report) . Shares have added about 1.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Woodward Q2 Earnings Top Estimates, Revenues Fall Y/Y Woodward reported relatively unimpressive second-quarter fiscal 2021 results with net earnings and sales declining on a year-over-year basis due to challenging market conditions as a result of the COVID-19 pandemic. However, both the bottom line and the top line surpassed the respective Zacks Consensus Estimate. Diligent execution of operational plans, gradual market recovery and prudent capital management acted as major tailwinds. Net Income
On a GAAP basis, net earnings in the quarter were $68.3 million or $1.04 per share compared with $91.3 million or $1.41 per share in the year-ago quarter. The decline in earnings was primarily attributable to top-line contraction owing to the virus outbreak.
Adjusted earnings came in at $68.3 million or $1.04 per share compared with $104.1 million or $1.61 per share in the year-earlier quarter. However, the bottom line beat the Zacks Consensus Estimate by 22 cents. Revenues
Net sales in the fiscal second quarter fell 19.3% year over year to $581.3 million due to lower sales in the Aerospace and Industrial segments on account of coronavirus adversities. Further, commercial OEM and aftermarket sales were severely hampered by the lockdown restrictions within the Aerospace segment. Although defense sales were slightly down year over year, the company continues to maintain a solid backlog with guided weapons volumes estimated to moderate in 2022. Weakness in oil and gas markets due to the pandemic led to lower sales in the Industrial segment. Nevertheless, the top line surpassed the consensus estimate of $576 million.
Segment Results Aerospace: Net sales were down 23.1% year over year to $364.7 million led by lower commercial sales due to decline in global passenger traffic and OEM production rates. In addition, weak defense OEM and soft aftermarket sales weigh on the Aerospace segment amid the global turmoil. However, positive indicators such as Boeing 737 MAX’s service recovery across key markets and gradual increase in aircraft production rates backed by the continued vaccine rollout are expected to boost the segment’s revenues in the upcoming quarters. The segment’s earnings were $69 million, down from $117.6 million in the year-ago quarter owing to lower sales volume, partially offset by cost reduction initiatives. Industrial: Net sales totaled $216.6 million, down 11.9% year over year due to the impact of COVID-19 across the company’s markets as well as weakness in oil and gas markets. While results were affected by the economic slowdown, the divestiture of renewable power systems and related businesses, along with favorable forex and strength in China natural gas engines, enhanced the segment’s profitability. Notably, investments are expected to pick up pace with gradual improvement in global oil demand and increasing prices. The segment’s earnings were $27.9 million, up from $26 million in the year-ago quarter led by cost-cutting efforts. Other Details
Total expenses declined to $502.8 million from $613 million a year ago. Adjusted EBITDA came in at $118.9 million compared with $165.4 million in the year-ago quarter.
Cash Flow & Liquidity
For the first six months of fiscal 2021, Woodward generated $219 million of net cash from operating activities compared with $52.2 million a year ago. Free cash flow was $205.7 million compared with $22.8 million in the prior-year period, driven by lower capital expenditures and effective working capital management. As of Mar 31, 2021, the company had $287.6 million in cash and cash equivalents with $736.1 million of long-term debt (less current portion).
Due to lack of visibility amid economic disruptions stemming from the coronavirus-induced turmoil, including significantly reduced global passenger travel, Woodward refrained from providing any guidance for fiscal 2021. Backed by a resilient business model, the company expects to emerge stronger from the crisis and leverage future market opportunities with a healthy balance sheet position.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 8.65% due to these changes.
At this time, Woodward has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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.