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Why Is Woodward (WWD) Down 3% Since Last Earnings Report?

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A month has gone by since the last earnings report for Woodward (WWD - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.

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

Woodward Q3 Earnings & Revenues Surpass Estimates

Woodward reported third-quarter fiscal 2018 adjusted earnings of $1.12 per share, which surpassed the Zacks Consensus Estimate of $1.03 by 8.7%.

Including the one-time adjustments, the company reported GAAP earnings of 77 cents per share.

Total Revenues

Quarterly net sales came in at $588.1 million, which surpassed the Zacks Consensus Estimate of $572 million by 2.8%. The top line also increased 7.1% from the year-ago figure of $549 million, primarily on the back of sales growth at the Aerospace segment. The quarterly sales were also favorably impacted by the foreign currency exchange rates.

Operational Update

Woodward’s total costs and expenses increased 11.2% year over year to $533.7 million in the quarter. The rise was led by higher cost of goods sold, selling, general, and administrative as well as research and development expenses.

Quarterly Segmental Performance

Aerospace: Revenues were up 13.7% year over year to $404.6 million, owing to ongoing ramp in production of next generation aircraft, robust commercial aftermarket sales and continued strength in smart weapons. Also, increase in business jet sales had a positive impact on the revenues of the segment.

Segment earnings totaled $82.2 million, up 22.4% year over year, majorly driven by higher sales volume.

Industrial: Revenues totaled $183.5 million, down 4.7% year over year due to weakness in industrial gas turbines, renewables, and China natural gas truck sales.

Meanwhile, the bottom line of the segment declined 49.9% to $10.5 million on account of lower sales volume.

Financial Details

As of Jun 30, 2018, cash and cash equivalents were $114.4 million, compared with $87.6 million as of Sep 30, 2017.

Long-term debt (excluding current portion) totaled $1,211.4 million as of Jun 30, 2018, up from $580.3 million as of Sep 30, 2017. Free cash flow was $74.2 million in the fiscal third quarter compared with $31.8 million in the year-ago quarter.

For the first nine months of fiscal 2018, net cash provided by operating activities was $162.1 million, compared with $183.8.8 million in the prior year. In the reported quarter, payments for property, plant and equipment were $31.1 million, compared with $22 million in the year-ago quarter.

Fiscal 2018 Guidance

Woodward currently expects net sales of approximately $2.3 billion for fiscal 2018, with Aerospace sales up approximately 14% and Industrial sales flat to slightly up, from the prior year. Adjusted earnings per share are now projected to be about $3.80, compared to the prior range of $3.60-$3.80.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Woodward has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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.

The company's stock is suitable solely for momentum based on our style scores.

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.




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