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Woodward (WWD) Up 42% in the Past Year: Will the Rally Last?
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Woodward (WWD - Free Report) stock is continuing its upward trajectory, with a gain of 41.9% in the past year compared with 26.4% and 9.1% growth of the S&P 500 Composite and the sub-industry, respectively.
Woodward is a leading designer, manufacturer and service provider of energy control and optimization solutions. The company provides a wide array of products for fuel, combustion, fluid, actuation and electronic applications, which serve the commercial aerospace, business jet, military and energy markets.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #1 (Strong Buy) stock appears to be a solid investment option at the moment.
Woodward’s earnings per share are expected to climb 25.2% and 9.7% on a year-over-year basis to $5.27 and $5.79 in fiscal 2024 and 2025, respectively. The Zacks Consensus Estimate for fiscal 2024 and 2025 earnings has improved by 7.1% and 2.5%, respectively, in the past 60 days.
Revenues for fiscal 2024 and 2025 are forecast to rise 11% and 5.1% to $3.23 billion and $3.4 billion, respectively.
WWD’s long-term earnings growth rate is pegged at 15.5%.
Image Source: Zacks Investment Research
Growth Catalysts
Woodward’s sales performance is benefiting from strong end-market demand across most of the verticals coupled with operational execution. Price realization, favorable product mix, and productivity and efficiency improvements are driving bottom-line improvement.
Revenues from Woodward’s Aerospace business are expected to improve in the upcoming quarters, driven by strength in commercial markets as well as higher defense activity. Management highlighted that geopolitical developments and increased government spending proposals implied potential higher procurement and research & development spend. This will likely bode well for the company.
In the first quarter of fiscal 2024, net sales for the segment were $461 million, up 16% year over year. The upside can be attributed to higher commercial OEM and commercial aftermarket sales resulting from higher OEM production rates, improving passenger traffic and fleet utilization.
Defense OEM sales also improved due to higher ground vehicles and guided weapons sales. Defense aftermarket sales benefited from supply-chain stabilization and higher output. For fiscal 2024, Aerospace sales growth is expected to be between 10% and 14%.
Woodward’s Industrial business segment is gaining from solid demand for power generation, especially in Asia and the Middle East, and continued requirement for backup power for data centers.
In the last reported quarter, segmental net sales totaled $326 million, up 46% year over year due to higher demand across all markets, especially on-highway natural gas truck business in China. Increasing demand for alternative fuels across the marine industry as well as momentum in the global marine market brought on by higher utilization and rising shipbuilding rates are other tailwinds. For fiscal 2024, the Industrial segment’s revenues are expected to increase in the range of 8-10% compared with the previously guided range of 4-6%.
WWD’s capital allocation strategy to enhance long-term shareholders’ value is noteworthy. It repurchased shares worth $126 million in fiscal 2023. The company’s board also approved a new three-year stock repurchase program in January 2024, allowing it to buy back up to $600 million worth of its stock through open market or private transactions.
This program replaces the prior two-year $800 million repurchase program, initiated in January 2022, during which WWD repurchased around $572 million worth of stock. The company also hiked the quarterly dividend by about 14%.
Headwinds Persist
Volatile China on-highway natural gas truck market, global macroeconomic weakness and rising costs are concerns. Though sales for on-highway natural gas trucks significantly increased in the fiscal first quarter, management does not expect higher sales to continue in the fiscal second quarter as demand trends indicate a return to earlier peak levels of $50 million.
Woodward also expects pressure on margin performance for its China on-highway natural gas truck business due to reduced volume leverage and increasing material costs (which includes spot buys and expedited freight).
An anticipated shift in mix and cost increases are likely to dampen overall margin performance for the remaining fiscal year. WWD continues to expect material cost inflation from the supply base throughout the calendar year 2024. Also, with the recent pause by the U.S. government of further LNG export approvals has made investment scenario of LNG development market uncertain.
The Zacks Consensus Estimate for MANH’s 2024 EPS has increased 3.6% in the past 60 days to $3.76. Manhattan Associates’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 27.6%. Shares of MANH have surged 73.4% in the past year.
The Zacks Consensus Estimate for Watts Water’s 2024 EPS has improved 11 cents to $8.44 in the past 60 days. The long-term earnings growth rate is pegged at 7.8%. Shares of WTS have jumped 13.3% in the past year.
The Zacks Consensus Estimate for Microsoft’s fiscal 2024 EPS is pegged at $11.63, indicating growth of 18.6% from the year-ago levels. Microsoft’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 8.8%. The long-term earnings growth rate is pegged at 16.2%. MSFT has gained 65.2% in the past year.
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Woodward (WWD) Up 42% in the Past Year: Will the Rally Last?
Woodward (WWD - Free Report) stock is continuing its upward trajectory, with a gain of 41.9% in the past year compared with 26.4% and 9.1% growth of the S&P 500 Composite and the sub-industry, respectively.
Woodward is a leading designer, manufacturer and service provider of energy control and optimization solutions. The company provides a wide array of products for fuel, combustion, fluid, actuation and electronic applications, which serve the commercial aerospace, business jet, military and energy markets.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #1 (Strong Buy) stock appears to be a solid investment option at the moment.
Woodward’s earnings per share are expected to climb 25.2% and 9.7% on a year-over-year basis to $5.27 and $5.79 in fiscal 2024 and 2025, respectively. The Zacks Consensus Estimate for fiscal 2024 and 2025 earnings has improved by 7.1% and 2.5%, respectively, in the past 60 days.
Revenues for fiscal 2024 and 2025 are forecast to rise 11% and 5.1% to $3.23 billion and $3.4 billion, respectively.
WWD’s long-term earnings growth rate is pegged at 15.5%.
Image Source: Zacks Investment Research
Growth Catalysts
Woodward’s sales performance is benefiting from strong end-market demand across most of the verticals coupled with operational execution. Price realization, favorable product mix, and productivity and efficiency improvements are driving bottom-line improvement.
Revenues from Woodward’s Aerospace business are expected to improve in the upcoming quarters, driven by strength in commercial markets as well as higher defense activity. Management highlighted that geopolitical developments and increased government spending proposals implied potential higher procurement and research & development spend. This will likely bode well for the company.
In the first quarter of fiscal 2024, net sales for the segment were $461 million, up 16% year over year. The upside can be attributed to higher commercial OEM and commercial aftermarket sales resulting from higher OEM production rates, improving passenger traffic and fleet utilization.
Defense OEM sales also improved due to higher ground vehicles and guided weapons sales. Defense aftermarket sales benefited from supply-chain stabilization and higher output. For fiscal 2024, Aerospace sales growth is expected to be between 10% and 14%.
Woodward’s Industrial business segment is gaining from solid demand for power generation, especially in Asia and the Middle East, and continued requirement for backup power for data centers.
In the last reported quarter, segmental net sales totaled $326 million, up 46% year over year due to higher demand across all markets, especially on-highway natural gas truck business in China. Increasing demand for alternative fuels across the marine industry as well as momentum in the global marine market brought on by higher utilization and rising shipbuilding rates are other tailwinds. For fiscal 2024, the Industrial segment’s revenues are expected to increase in the range of 8-10% compared with the previously guided range of 4-6%.
WWD’s capital allocation strategy to enhance long-term shareholders’ value is noteworthy. It repurchased shares worth $126 million in fiscal 2023. The company’s board also approved a new three-year stock repurchase program in January 2024, allowing it to buy back up to $600 million worth of its stock through open market or private transactions.
This program replaces the prior two-year $800 million repurchase program, initiated in January 2022, during which WWD repurchased around $572 million worth of stock. The company also hiked the quarterly dividend by about 14%.
Headwinds Persist
Volatile China on-highway natural gas truck market, global macroeconomic weakness and rising costs are concerns. Though sales for on-highway natural gas trucks significantly increased in the fiscal first quarter, management does not expect higher sales to continue in the fiscal second quarter as demand trends indicate a return to earlier peak levels of $50 million.
Woodward also expects pressure on margin performance for its China on-highway natural gas truck business due to reduced volume leverage and increasing material costs (which includes spot buys and expedited freight).
An anticipated shift in mix and cost increases are likely to dampen overall margin performance for the remaining fiscal year. WWD continues to expect material cost inflation from the supply base throughout the calendar year 2024. Also, with the recent pause by the U.S. government of further LNG export approvals has made investment scenario of LNG development market uncertain.
Other Key Picks
Some better-ranked stocks worth consideration in the broader technology space are Manhattan Associates (MANH - Free Report) , Watts Water Technologies (WTS - Free Report) and Microsoft (MSFT - Free Report) . While Manhattan Associates sports a Zacks Rank #1, Watts Water and Microsoft carry a Zacks Rank of 2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MANH’s 2024 EPS has increased 3.6% in the past 60 days to $3.76. Manhattan Associates’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 27.6%. Shares of MANH have surged 73.4% in the past year.
The Zacks Consensus Estimate for Watts Water’s 2024 EPS has improved 11 cents to $8.44 in the past 60 days. The long-term earnings growth rate is pegged at 7.8%. Shares of WTS have jumped 13.3% in the past year.
The Zacks Consensus Estimate for Microsoft’s fiscal 2024 EPS is pegged at $11.63, indicating growth of 18.6% from the year-ago levels. Microsoft’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 8.8%. The long-term earnings growth rate is pegged at 16.2%. MSFT has gained 65.2% in the past year.