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WWD Stock Surges 32% in the Past 3 Months: Will the Uptrend Continue?
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Key Takeaways
WWD's Q3 results beat estimates with year-over-year growth in both revenues and earnings.
Aerospace segment sales rose 12.9% on 52% defense OEM and 23% commercial aftermarket growth.
Industrial momentum driven by data center power, marine demand and key defense control contracts.
Woodward, Inc. (WWD - Free Report) is gaining from strength in Aerospace and Core Industrial (power generation, oil & gas, and marine transportation) units. Aerospace is riding on strong defense demand and a robust commercial after-market, partially offset by softer commercial OEM (owing to Boeing work stoppage) and defense after-market sales. The company has also been investing significantly in upgrading technologies to secure fresh businesses.
The company reported third-quarter fiscal 2025 results, wherein earnings and revenues not only beat the Zacks Consensus Estimate but also grew year over year. Confident of navigating tariffs and current market conditions, the company raised the lower end of its sales and earnings guidance and reaffirmed its full-year outlook for other metrics.
The stock has surged 31.8% in the past three months compared with the Zacks Aerospace Defense Equipment industry’s growth of 21.9%. Over the same time frame, the Zacks Aerospace sector and the S&P 500 composite have registered growth of 18.4% and 7.7%, respectively.
Image Source: Zacks Investment Research
WWD Aerospace Gains From Defense Strength, Solid Aftermarket
Revenues from Woodward’s Aerospace business are expected to improve in the upcoming quarters, driven by strength in the commercial aftermarket as well as higher defense activity, despite supply-chain challenges. In the second quarter of fiscal 2025, net sales for the segment were up 12.9% year over year, fueled by strong defense demand and a robust commercial after-market, partially offset by softer commercial OEM and defense after-market sales. Defense OEM sales increased 52%, driven by strong demand for smart defense programs.
Commercial after-market sales grew 23%, supported by both higher pricing and volume. Segmental earnings were $125 million, up from $98 million a year ago. The earnings growth was primarily driven by price realization and higher volumes, partially offset by inflationary pressure and an unfavorable mix. Geopolitical developments have been driving demand for defense products, and the company expects strong growth across its defense portfolio, including a considerable increase in smart defense.
For fiscal 2025, Aerospace segment revenues are anticipated to increase in the range of 8-13% compared with 6-13% predicted earlier, whereas segment earnings (as a % of revenues) are still expected to be 20-21%.
Woodward’s Industrial Segment Bodes Well
Woodward’s Industrial business segment has been gaining from solid demand for power generation and continued requirement for primary and backup power for data centers. Higher investment in gas-powered generation to support grid stability is another tailwind. Increasing demand for alternative fuels across the marine industry, as well as momentum in the global marine market brought on by higher utilization, bodes well.
Within oil and gas, an encouraging investment outlook in China, the Middle East and India’s refining and petrochemical activities are other growth drivers. Woodward marked a major milestone in the second quarter of fiscal 2025 with the delivery of its first MicroNet XT Advanced Gas Turbine Control System for the U.S. Navy's DDG-51 destroyers, under a contract covering 30 units through 2027 and scaling up to 135 in 10-15 years. The next upgrade phase will add redundancy for propulsion systems, with low-rate production planned from 2026 to 2029. Woodward was also selected as the preferred propulsion control supplier for South Korea’s KDDX naval program.
Owing to strong demand momentum, for fiscal 2025, the expected decline in Industrial segment revenues has been narrowed to a more favorable range of 7-9% from the earlier projection of 7-11%. The company remains confident in achieving core industrial margins between 14% and 15% of sales for the year.
WWD’s Compelling Valuation
WWD stock is trading at a discount with a forward 12-month price/earnings multiple of 33.86 compared with the industry’s multiple of 46.87.
Image Source: Zacks Investment Research
Headwinds Loom Large for WWD
Volatile China on-highway natural-gas truck market, global macroeconomic weakness and rising costs are concerns. In the fiscal second quarter, China on-highway sales totaled $21 million, down $45 million from a year ago. Transportation sales declined 18% due to the anticipated fall in China on-highway sales. Industrial segments’ earnings were mainly affected by lower China on-highway volume.
Management earlier announced that it expects full-year revenues from China on-highway natural-gas trucks to be $40 million for the year, indicating a significant decline of $175 million from fiscal 2024. There is no update for the same on this earnings call.
How Should Investors Play WWD Stock?
With a Zacks Rank #3 (Hold), WWD appears to be treading in the middle of the road. The company is gaining from strength in Aerospace and Core Industrial segments. Shareholder friendly policy is a plus. However, Volatile China on-highway natural-gas truck market, supply-chain woes within Aerospace, global macro uncertainty and rising costs remain concerns.
Therefore, we believe new investors should wait for a better entry point, and existing investors should retain the WWD stock.
Key Picks From the Aerospace Defense Equipment Space
ESLT’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 21.12%. In the last reported quarter, Elbit Systems delivered an earnings surprise of 11.74%. Its shares have surged 124.4% in the past year.
TGI’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing in one, with the average surprise being 133.5%. In the last reported quarter, Triumph delivered an earnings surprise of 54.84%. Its shares have increased 73.5% in the past year.
CW’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 13.34%. In the last reported quarter, Curtiss-Wright delivered an earnings surprise of 17.99%. Its shares have improved 71.2% in the past year.
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WWD Stock Surges 32% in the Past 3 Months: Will the Uptrend Continue?
Key Takeaways
Woodward, Inc. (WWD - Free Report) is gaining from strength in Aerospace and Core Industrial (power generation, oil & gas, and marine transportation) units. Aerospace is riding on strong defense demand and a robust commercial after-market, partially offset by softer commercial OEM (owing to Boeing work stoppage) and defense after-market sales. The company has also been investing significantly in upgrading technologies to secure fresh businesses.
The company reported third-quarter fiscal 2025 results, wherein earnings and revenues not only beat the Zacks Consensus Estimate but also grew year over year. Confident of navigating tariffs and current market conditions, the company raised the lower end of its sales and earnings guidance and reaffirmed its full-year outlook for other metrics.
The stock has surged 31.8% in the past three months compared with the Zacks Aerospace Defense Equipment industry’s growth of 21.9%. Over the same time frame, the Zacks Aerospace sector and the S&P 500 composite have registered growth of 18.4% and 7.7%, respectively.
Image Source: Zacks Investment Research
WWD Aerospace Gains From Defense Strength, Solid Aftermarket
Revenues from Woodward’s Aerospace business are expected to improve in the upcoming quarters, driven by strength in the commercial aftermarket as well as higher defense activity, despite supply-chain challenges. In the second quarter of fiscal 2025, net sales for the segment were up 12.9% year over year, fueled by strong defense demand and a robust commercial after-market, partially offset by softer commercial OEM and defense after-market sales. Defense OEM sales increased 52%, driven by strong demand for smart defense programs.
Commercial after-market sales grew 23%, supported by both higher pricing and volume. Segmental earnings were $125 million, up from $98 million a year ago. The earnings growth was primarily driven by price realization and higher volumes, partially offset by inflationary pressure and an unfavorable mix. Geopolitical developments have been driving demand for defense products, and the company expects strong growth across its defense portfolio, including a considerable increase in smart defense.
For fiscal 2025, Aerospace segment revenues are anticipated to increase in the range of 8-13% compared with 6-13% predicted earlier, whereas segment earnings (as a % of revenues) are still expected to be 20-21%.
Woodward’s Industrial Segment Bodes Well
Woodward’s Industrial business segment has been gaining from solid demand for power generation and continued requirement for primary and backup power for data centers. Higher investment in gas-powered generation to support grid stability is another tailwind. Increasing demand for alternative fuels across the marine industry, as well as momentum in the global marine market brought on by higher utilization, bodes well.
Within oil and gas, an encouraging investment outlook in China, the Middle East and India’s refining and petrochemical activities are other growth drivers. Woodward marked a major milestone in the second quarter of fiscal 2025 with the delivery of its first MicroNet XT Advanced Gas Turbine Control System for the U.S. Navy's DDG-51 destroyers, under a contract covering 30 units through 2027 and scaling up to 135 in 10-15 years. The next upgrade phase will add redundancy for propulsion systems, with low-rate production planned from 2026 to 2029. Woodward was also selected as the preferred propulsion control supplier for South Korea’s KDDX naval program.
Owing to strong demand momentum, for fiscal 2025, the expected decline in Industrial segment revenues has been narrowed to a more favorable range of 7-9% from the earlier projection of 7-11%. The company remains confident in achieving core industrial margins between 14% and 15% of sales for the year.
WWD’s Compelling Valuation
WWD stock is trading at a discount with a forward 12-month price/earnings multiple of 33.86 compared with the industry’s multiple of 46.87.
Image Source: Zacks Investment Research
Headwinds Loom Large for WWD
Volatile China on-highway natural-gas truck market, global macroeconomic weakness and rising costs are concerns. In the fiscal second quarter, China on-highway sales totaled $21 million, down $45 million from a year ago. Transportation sales declined 18% due to the anticipated fall in China on-highway sales. Industrial segments’ earnings were mainly affected by lower China on-highway volume.
Management earlier announced that it expects full-year revenues from China on-highway natural-gas trucks to be $40 million for the year, indicating a significant decline of $175 million from fiscal 2024. There is no update for the same on this earnings call.
How Should Investors Play WWD Stock?
With a Zacks Rank #3 (Hold), WWD appears to be treading in the middle of the road. The company is gaining from strength in Aerospace and Core Industrial segments. Shareholder friendly policy is a plus. However, Volatile China on-highway natural-gas truck market, supply-chain woes within Aerospace, global macro uncertainty and rising costs remain concerns.
Therefore, we believe new investors should wait for a better entry point, and existing investors should retain the WWD stock.
Key Picks From the Aerospace Defense Equipment Space
Some better-ranked stocks from the Aerospace Defense Equipment space are Elbit Systems Ltd. (ESLT - Free Report) , Triumph Group, Inc. (TGI - Free Report) and Curtiss-Wright Corporation (CW - Free Report) . ESLT and TGI presently sport a Zacks Rank #1 (Strong Buy), whereas CW carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ESLT’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 21.12%. In the last reported quarter, Elbit Systems delivered an earnings surprise of 11.74%. Its shares have surged 124.4% in the past year.
TGI’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing in one, with the average surprise being 133.5%. In the last reported quarter, Triumph delivered an earnings surprise of 54.84%. Its shares have increased 73.5% in the past year.
CW’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 13.34%. In the last reported quarter, Curtiss-Wright delivered an earnings surprise of 17.99%. Its shares have improved 71.2% in the past year.