Woodward ((WWD)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Woodward’s recent earnings call painted a picture of robust performance, marked by impressive revenue growth and a significant increase in earnings per share (EPS). Despite these successes, the company acknowledged some challenges, including a decline in commercial OEM sales and tempered future growth expectations in certain sectors.
Record Annual Revenue
Woodward achieved a milestone by surpassing $3.5 billion in annual revenue for the first time. This achievement was driven by strong performances across both its business segments, showcasing the company’s ability to capitalize on market opportunities and execute its strategic initiatives effectively.
Aerospace Segment Growth
The aerospace segment experienced a remarkable 14% increase in sales, reaching record levels. This growth was accompanied by a margin expansion of 290 basis points, fueled by robust performances in commercial services and defense OEM. The aerospace division’s success underscores its critical role in Woodward’s overall growth strategy.
Industrial Segment Performance
Excluding China, the industrial segment saw a 10% growth in sales, with core industrial margins expanding by 110 basis points. Notably, there was double-digit growth in the oil and gas and power generation sectors, highlighting Woodward’s strong position in these markets.
Significant EPS Increase
Woodward reported a nearly 13% increase in adjusted earnings per share, reaching an all-time high. This achievement reflects the company’s operational efficiency and ability to drive profitability through strategic initiatives and cost management.
Strategic Investments and Acquisition
The completion of a strategic transaction enhanced Woodward’s electromechanical actuation business, including securing a new contract with Airbus. This move is expected to bolster the company’s capabilities and competitive position in the aerospace sector.
Strong Free Cash Flow and Shareholder Returns
Woodward generated $340 million in free cash flow, with over $238 million returned to shareholders through share repurchases and dividends. This demonstrates the company’s commitment to delivering value to its shareholders while maintaining financial flexibility.
Commercial OEM Sales Decrease
The company faced a 6% decline in commercial OEM sales, attributed to Boeing’s production stoppage and inventory normalization. This challenge highlights the volatility and dependency on major clients in the aerospace sector.
Impact of Divestiture on Power Generation
Power generation growth was limited to 6% due to the divestiture of the combustion business, which previously contributed approximately $15 million in quarterly sales. This divestiture reflects Woodward’s strategic focus on core areas while managing portfolio adjustments.
China Market Challenges
The industrial segment experienced a 3% decrease in sales due to reduced demand in China’s on-highway market. This decline underscores the challenges posed by geopolitical and market-specific factors affecting global operations.
Muted Growth in Commercial Services Expected
Woodward anticipates muted top-line growth in commercial services for 2026 compared to 2025. This expectation is due to the previous year’s high spare end item demand and advanced buying, which are not expected to repeat at the same levels.
Forward-Looking Guidance
Looking ahead to 2026, Woodward remains confident in its growth prospects, projecting consolidated net sales growth between 7-12%. The aerospace segment is expected to see sales rise by 9-15%, while industrial sales are projected to grow by 5-9%. The company forecasts adjusted EPS to be between $7.50 and $8.00, with plans to return $650-700 million to shareholders. Capital expenditures are anticipated at $290 million, focusing on automation and a new facility in Spartanburg, South Carolina.
In conclusion, Woodward’s earnings call highlighted a strong performance with record revenue and EPS growth, driven by strategic investments and robust segment performances. Despite some challenges, the company remains optimistic about its future growth, backed by solid guidance and a commitment to shareholder returns.