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Woodward (WWD) Q3 Earnings & Revenue Miss, Stock Down

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Woodward, Inc. (WWD - Free Report) reported tepid third-quarter fiscal 2022 results. Adjusted net earnings came in at 64 cents per share, declining 13.5% year over year. The bottom line missed the Zacks Consensus Estimate by 29.7%.

Net sales in the fiscal third quarter moved up 10.2% year over year to $614 million due to higher sales in the Aerospace segment. In the quarter under review, sales were affected by nearly $100 million due to ongoing supply-chain and labor disruptions. Also, unfavorable foreign currency exchange rates affected sales by $18 million. The top line lagged the consensus estimate by 3.1%.

Woodward, Inc. Price, Consensus and EPS Surprise

Woodward, Inc. Price, Consensus and EPS Surprise

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

Owing to supply-chain and labor disruptions; and inflation, the company has lowered its guidance for the fiscal 2022. For fiscal 2022, net sales are now expected to be between $2.35 billion and $2.4 billion compared with the earlier guidance of $2.4 billion and $2.55 billion.

The Aerospace segment revenues are expected to increase between 8% and 10%, while the Industrial segment revenues are expected to remain flat. Earlier, the Aerospace segment revenues were expected to increase low double digits to mid-teens, while the Industrial segment revenues were expected to increase between 5% and 10%.

Adjusted free cash flow is projected to be between $100 million and $120 million. Earlier, adjusted free cash flow was projected to be between $200 million and $230 million.

Adjusted earnings are likely to be in the range of $2.55-$2.75 per share compared with the earlier projection of $3.20-$3.60.

Following the announcement, shares are down 10.9% in the pre-market trading on Aug 2.

Segment Results

Aerospace: Net sales were $402 million, up 18% year over year. The upside can be attributed to higher commercial OEM (up 37% year over year) and aftermarket sales (up 44%) resulting from improving passenger traffic and aircraft utilization along with higher original equipment manufacturer (OEM) production rates. Continued softness in defense OEM and aftermarket sales due to supply-chain disruptions were headwinds.

The segment’s earnings were $57 million, up from $53 million in the year-ago quarter. The upside was caused by higher commercial OEM and aftermarket sales, partly offset by increasing material and labour costs and supply-chain constraints.

Industrial: Net sales totaled $213 million compared with $216 million in the prior-year quarter. The decline was due to the negative impact of unfavorable foreign exchange and weakness in China’s natural gas engines. However, it was mitigated by higher marine sales and increased utilization of the in-service fleet.

The segment’s earnings were $21 million, down from $27 million in the year-ago quarter, mainly due to net inflationary impacts on material and labour costs; and increasing costs due to supply-chain disruptions and training of new hires.

Other Details

Total costs and expenses increased to $564 million, up 13.3% year over year. Adjusted EBITDA came in at $88.4 million compared with $99 million in the year-ago quarter.

Cash Flow & Liquidity

As of Jun 30, 2022, Woodward had $99.7 million in cash and cash equivalents with $716.7 million of long-term debt (less the current portion).

For the nine months ended, Woodward generated $86 million of net cash from operating activities, compared with $318 million a year ago. Free cash flow for the same period came in at $49 million compared with $297 million in the prior-year period. The downtick was mainly caused by increased working capital due to production delays from supply-chain constraints.

Woodward repurchased shares worth $156 million in the quarter under review. In January 2022, the company authorized a new $800 million, two-year stock repurchase program, reinforcing its financial position and positive outlook. The company has $399 million remaining under the share repurchase authorization.

Zacks Rank & Stocks to Consider

Woodward currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks from the broader technology space are Badger Meter (BMI - Free Report) , InterDigital (IDCC - Free Report) and Cadence Design Systems (CDNS - Free Report) . Cadence Design Systems and  Badger Meter sport a Zacks Rank #1 (Strong Buy) whereas InterDigital carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CDNS 2022 earnings is pegged at $4.11 per share, rising 5.7% in the past 60 days. The long-term earnings growth rate is anticipated to be 17.7%.

Cadence’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 9.8%. Shares of CDNS have jumped 25.6% in the past year.

The Zacks Consensus Estimate for BMI’s 2022 earnings is pegged at $2.30 per share, up 7% in the past 60 days.

Badger Meter’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters, with the average being 12.6%. Shares of BMI have lost 3.7% of their value in the past year.

The Zacks Consensus Estimate for InterDigital’s 2022 earnings is pegged at $2.76 per share, declining 15.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 15%.

InterDigital’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 141.1%. Shares of IDCC have declined 6.1% in the past year.

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