A month has gone by since the last earnings report for Woodward (WWD Quick QuoteWWD - Free Report) . Shares have lost about 3.8% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Woodward due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent drivers for Woodward, Inc. before we dive into how investors and analysts have reacted as of late.

Woodward's Q3 Earnings Surpass Estimates

Woodward reported third-quarter fiscal 2025 adjusted net earnings per share (EPS) of $1.76, which increased 8% year over year. The figure beat the Zacks Consensus Estimate by 8.6%.

Quarterly net sales grew 8% year over year to $915 million and surpassed the consensus estimate by 3.1%. This growth was driven by strong performance in the Aerospace segment and the Core Industrial business.

The company’s strong year-to-date performance reinforces confidence in both its mid-term and long-term growth outlook as it continues to enhance its ability to meet sustained demand across the end markets. Given this momentum, improved macroeconomic visibility and expected continued growth, the company raised its full-year sales and earnings guidance.

However, the company narrowed its free cash flow range. The reduction was due to increased working capital needs to support higher sales amid a dynamic supply chain and production environment.

Segment Results

Aerospace: Net sales were $596 million, up 15.2% year over year. We predicted the metric to be $571 million. Aerospace growth was fueled by robust performance in smart defense and commercial services, partially offset by softer results in commercial OEM and defense services.

Defense OEM sales increased 55.7% in the quarter to $150 million, driven by strong demand for smart defense programs. Commercial after-market sales grew 30%, driven by both pricing and higher volumes, supported by the continued high utilization of legacy aircraft.

Commercial OEM sales declined 7.6% year over year to $175 million as airframers dealt with supply chain disruptions and customers actively managed their inventory levels. Defense after-market sales were down 16.2%.

Segmental earnings were $126 million, up 23.5% year over year. The earnings growth was primarily driven by price realization and higher volumes, partially offset by inflationary pressure, strategic investments in manufacturing and an unfavorable product mix.

Industrial: Net sales totaled $319 million, down 3.2% year over year. We expected the metric to be $304.4 million.

Within the Industrial segment, Transportation sales declined 12%. In the third quarter, China on-highway sales were down $36 million from a year ago.

Core industrial sales, which exclude China on-highway business, were up 9%, driven by a 16% increase in Oil & Gas, a 16% increase in Marine Transportation, and Power Generation remained flat.

Segmental earnings were $48 million, falling from $60 million in the year-ago quarter. Industrial earnings were affected by lower China on-highway volumes and inflationary pressures, which were partly offset by price realization.

Margin Performance

Gross margin was up 10 basis points year over year to 27.2%.

Total costs and expenses were $788.6 million, up 8.7% year over year. Adjusted EBITDA was $165.9 million compared with $160.7 million a year ago.

Cash Flow & Liquidity

As of June 30, 2025, Woodward had $473.2 million in cash and cash equivalents with $503.9 million of long-term debt (less the current portion).

For the quarter ended June 30, 2025, WWD generated $126 million of net cash from operating activities compared with $153 million reported in the prior-year period.

Free cash flow was $99 million compared with $137 million in the year-ago quarter. The decline was mainly due to higher working capital requirements.

In the quarter under review, WWD returned $62 million to its shareholders in the form of $17 million of dividends and $45 million worth of share repurchases.

In the first nine months of 2025, total returns to stockholders reached $172 million, including $124 million in share repurchases and $48 million in dividends.

Fiscal 2025 Guidance

Woodward raised its sales and earnings guidance, lowering its adjusted effective tax rate and narrowing its free cash flow range.

For fiscal 2025, the company now expects consolidated sales to range between $3450 million and $3525 million compared with the prior guidance of $3,375 million and $3,500 million. Adjusted EPS is now expected to be between $6.50 and $6.75 compared with the previous guidance of $5.95 to $6.25.

Aerospace segment revenues are anticipated to increase in the range of 11% to 13% compared with 8-13% predicted earlier, and a decline in Industrial sales of 5% to 7% compared to the prior guidance of a decrease of 7-9%.

The company anticipates Aerospace segment margins to be between 21% and 21.5%, and Industrial margins to be approximately 14.5%.

Woodward expects the adjusted effective tax rate for 2025 to be around 17% from prior guidance of 19%. Free cash flow is now projected to be between $315 million and $350 million compared to the previous guidance of $350 million to $400 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates review.

The consensus estimate has shifted 8.46% due to these changes.

VGM Scores

Currently, Woodward has a average Growth Score of C, a score with the same score on the momentum front. However, the stock has a grade of F on the value side, putting it in the fifth quintile for value investors.

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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Woodward has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Woodward is part of the Zacks Aerospace - Defense Equipment industry. Over the past month, Hexcel (HXL Quick QuoteHXL - Free Report) , a stock from the same industry, has gained 3.6%. The company reported its results for the quarter ended June 2025 more than a month ago.

Hexcel reported revenues of $489.9 million in the last reported quarter, representing a year-over-year change of -2.1%. EPS of $0.50 for the same period compares with $0.60 a year ago.

Hexcel is expected to post earnings of $0.41 per share for the current quarter, representing a year-over-year change of -12.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -9%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Hexcel. Also, the stock has a VGM Score of D.