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Woodward (WWD) Up 11.2% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Woodward (WWD - Free Report) . Shares have added about 11.2% 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 Q1 Earnings Lag Estimates, Revenues Up Y/Y
Woodward reported tepid first-quarter fiscal 2022 results with both the bottom line and top line missing their respective Zacks Consensus Estimate. Despite the global economic upswing, macroeconomic uncertainties, weak defense sales and supply chain disruptions stemming from the pandemic continue to hamper Woodward’s Industrial business.
However, the company witnessed strength across the aerospace segment resulting from recovering passenger traffic, higher aircraft utilization and original equipment manufacturer (OEM) production rates. Increased utilization of the commercial fleet and accelerated investments as a result of higher capital spending aided the segment’s quarterly results amid the global turmoil.
Net Income
On a GAAP basis, net earnings in the quarter were $30.3 million or 47 cents per share compared with $41.6 million or 64 cents per share in the year-ago quarter. The year-over-year decline despite top-line improvement was due to higher operating expenses.
Adjusted net earnings came in at $36.3 million or 56 cents per share compared with $41.6 million or 64 cents per share in the year-earlier quarter. The bottom line missed the Zacks Consensus Estimate by 25 cents.
Revenues
Net sales in the fiscal first quarter improved 0.7% year over year to $541.6 million due to higher sales in the Aerospace segment. Despite recovery across most of its end markets, sales were hampered by nearly $70 million due to ongoing industry-wide COVID-19 related disruptions, including global supply chain woes, labor shortages and customer-initiated shipment delays. The top line lagged the consensus estimate of $590 million.
Commercial OEM and aftermarket sales improved on a year-over-year basis, thanks to the increasing aircraft build rates and recovering domestic passenger traffic. Defense OEM sales were down on lower guided weapons. With businesses picking up pace despite the lingering COVID-19 impact, factors such as increasing oil prices and energy demand have boosted capital spending, thereby accelerating investments.
Segment Results
Aerospace: Net sales jumped to $336.4 million from $321.7 million, led by higher commercial OEM (up 38% year over year) and aftermarket sales (up 31%) resulting from improving passenger traffic. As domestic passenger traffic nears pre-COVID levels, aircraft utilization and OEM production rates increased. However, international traffic lagged. Moreover, higher utilization of the commercial fleet aided the segment’s quarterly results amid the global turmoil. Continued softness in defense aftermarket sales and guided weapons due to supply chain disruptions played a spoilsport.
Positive indicators such as a gradual increase in aircraft production rates are expected to boost the segment’s revenues in the upcoming quarters. The segment’s earnings were $51.1 million, up from $46.5 million in the year-ago quarter driven by higher sales volume in aftermarket and commercial OEM.
Industrial: Net sales totaled $205.2 million, down 5% year over year due to the impact of global supply chain constraints stemming from the pandemic accompanied by weakness in China natural gas engines. However, it was partly offset by higher marine sales on new ship orders and increased utilization.
Investments are expected to increase with the gradual improvement in marine transportation, global oil and gas and power generation demand. The segment’s earnings were $23.7 million, down from $32.9 million in the year-ago quarter, mainly due to lower sales volume, product mix and net inflationary impacts.
Other Details
Total costs and expenses increased to $503.8 million from $490 million a year ago. Adjusted EBITDA came in at $84.1 million compared with $89.1 million in the year-ago quarter.
Cash Flow & Liquidity
For the first three months of fiscal 2022, Woodward generated $39.3 million of net cash from operating activities compared with $146.7 million a year ago. Free cash flow for the same period came in at $26.2 million compared with $139.5 million in the prior-year period. The decrease was mainly due to increased working capital to support the anticipated growth in 2022.
As of Dec 31, 2021, Woodward had $427 million in cash and cash equivalents with $729.8 million of long-term debt (less current portion). The company also authorized a new $800 million, two-year stock repurchase program, reinforcing its financial position and positive outlook.
Guidance Reiterated
In fiscal 2022, net sales are expected to be between $2.45 and $2.65 billion, with improvement in both the segment sales. While Aerospace segment earnings are likely to increase by approximately 200 to 300 basis points on the back of increased sales volume in both commercial OEM and aftermarket businesses, Industrial segment earnings are expected to be approximately flat to up by 150 basis points driven by higher sales volume. Woodward remains focused on leveraging its operational structure and optimizing working capital to tap on growth opportunities and return to pre-COVID-19 capital allocation strategy to enhance long-term shareholder value. Adjusted earnings are likely to be in the range of $3.55 to $3.95 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -12.42% due to these changes.
VGM Scores
At this time, Woodward has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Woodward has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Woodward (WWD) Up 11.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Woodward (WWD - Free Report) . Shares have added about 11.2% 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 Q1 Earnings Lag Estimates, Revenues Up Y/Y
Woodward reported tepid first-quarter fiscal 2022 results with both the bottom line and top line missing their respective Zacks Consensus Estimate. Despite the global economic upswing, macroeconomic uncertainties, weak defense sales and supply chain disruptions stemming from the pandemic continue to hamper Woodward’s Industrial business.
However, the company witnessed strength across the aerospace segment resulting from recovering passenger traffic, higher aircraft utilization and original equipment manufacturer (OEM) production rates. Increased utilization of the commercial fleet and accelerated investments as a result of higher capital spending aided the segment’s quarterly results amid the global turmoil.
Net Income
On a GAAP basis, net earnings in the quarter were $30.3 million or 47 cents per share compared with $41.6 million or 64 cents per share in the year-ago quarter. The year-over-year decline despite top-line improvement was due to higher operating expenses.
Adjusted net earnings came in at $36.3 million or 56 cents per share compared with $41.6 million or 64 cents per share in the year-earlier quarter. The bottom line missed the Zacks Consensus Estimate by 25 cents.
Revenues
Net sales in the fiscal first quarter improved 0.7% year over year to $541.6 million due to higher sales in the Aerospace segment. Despite recovery across most of its end markets, sales were hampered by nearly $70 million due to ongoing industry-wide COVID-19 related disruptions, including global supply chain woes, labor shortages and customer-initiated shipment delays. The top line lagged the consensus estimate of $590 million.
Commercial OEM and aftermarket sales improved on a year-over-year basis, thanks to the increasing aircraft build rates and recovering domestic passenger traffic. Defense OEM sales were down on lower guided weapons. With businesses picking up pace despite the lingering COVID-19 impact, factors such as increasing oil prices and energy demand have boosted capital spending, thereby accelerating investments.
Segment Results
Aerospace: Net sales jumped to $336.4 million from $321.7 million, led by higher commercial OEM (up 38% year over year) and aftermarket sales (up 31%) resulting from improving passenger traffic. As domestic passenger traffic nears pre-COVID levels, aircraft utilization and OEM production rates increased. However, international traffic lagged. Moreover, higher utilization of the commercial fleet aided the segment’s quarterly results amid the global turmoil. Continued softness in defense aftermarket sales and guided weapons due to supply chain disruptions played a spoilsport.
Positive indicators such as a gradual increase in aircraft production rates are expected to boost the segment’s revenues in the upcoming quarters. The segment’s earnings were $51.1 million, up from $46.5 million in the year-ago quarter driven by higher sales volume in aftermarket and commercial OEM.
Industrial: Net sales totaled $205.2 million, down 5% year over year due to the impact of global supply chain constraints stemming from the pandemic accompanied by weakness in China natural gas engines. However, it was partly offset by higher marine sales on new ship orders and increased utilization.
Investments are expected to increase with the gradual improvement in marine transportation, global oil and gas and power generation demand. The segment’s earnings were $23.7 million, down from $32.9 million in the year-ago quarter, mainly due to lower sales volume, product mix and net inflationary impacts.
Other Details
Total costs and expenses increased to $503.8 million from $490 million a year ago. Adjusted EBITDA came in at $84.1 million compared with $89.1 million in the year-ago quarter.
Cash Flow & Liquidity
For the first three months of fiscal 2022, Woodward generated $39.3 million of net cash from operating activities compared with $146.7 million a year ago. Free cash flow for the same period came in at $26.2 million compared with $139.5 million in the prior-year period. The decrease was mainly due to increased working capital to support the anticipated growth in 2022.
As of Dec 31, 2021, Woodward had $427 million in cash and cash equivalents with $729.8 million of long-term debt (less current portion). The company also authorized a new $800 million, two-year stock repurchase program, reinforcing its financial position and positive outlook.
Guidance Reiterated
In fiscal 2022, net sales are expected to be between $2.45 and $2.65 billion, with improvement in both the segment sales. While Aerospace segment earnings are likely to increase by approximately 200 to 300 basis points on the back of increased sales volume in both commercial OEM and aftermarket businesses, Industrial segment earnings are expected to be approximately flat to up by 150 basis points driven by higher sales volume. Woodward remains focused on leveraging its operational structure and optimizing working capital to tap on growth opportunities and return to pre-COVID-19 capital allocation strategy to enhance long-term shareholder value. Adjusted earnings are likely to be in the range of $3.55 to $3.95 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -12.42% due to these changes.
VGM Scores
At this time, Woodward has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Woodward has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.