Woodward (WWD) Q1 Earnings & Revenues Top Estimates, Rise Y/Y
Woodward, Inc WWD reported adjusted net earnings of $1.45 per share for first-quarter fiscal 2024, which beat the Zacks Consensus Estimate by 31.8%. In the year-ago quarter, WWD reported adjusted net earnings of 49 cents.
Quarterly net sales increased 27% year over year to $787 million. Continued momentum in end market demand and improved operational performance resulted in this uptick. The top line beat the consensus estimate by 6.4%.
Post this announcement, the stock is up 5.8% in the pre-market trading hours on Jan 30. In the past year, shares of WWD have gained 39.6% compared with sub-industry’s growth of 10%.
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Segment Results
Aerospace: Net sales 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. We predicted the metric to be $456.9 million.
Woodward, Inc. Price, Consensus and EPS Surprise
Woodward, Inc. price-consensus-eps-surprise-chart | Woodward, Inc. Quote
Segmental earnings were $79 million, up from $55 million a year ago. Higher OEM sales and improved aftermarket volume resulted in the uptick.
Industrial: 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. We expected the metric to be $268.5 million.
Demand for natural gas heavy-duty trucks in China increased due to a number of factors including a stable supply of natural gas, favorable LNG to diesel price spread and carbon reduction efforts across China. Sales for on-highway natural gas trucks in China came in at $75 million in the quarter under review. However, management does not expect higher sales to continue in fiscal second quarter as demand trends indicate return to earlier peak levels of $50 million.
Segmental earnings were $67 million, up from $11 million in the year-earlier quarter mainly due to increased demand for on-highway natural gas trucks in China and operational improvements (like higher output and other efficiency gains).
Other Details
Gross margin was up 560 basis points year over year to 26%.
Total costs and expenses increased to $677 million, up 15.4% year over year. Adjusted EBITDA was $148 million compared with $72 million a year ago.
Cash Flow & Liquidity
As of Dec 31, Woodward had $144.4 million in cash and cash equivalents with $653 million of long-term debt (less the current portion).
For the fiscal first quarter, WWD generated $47 million of net cash from operating activities, rising from $5 million in the prior-year quarter.
Adjusted free cash flow was $3 million. It recorded adjusted free cash outflow of $19 million in the prior-year quarter. The uptick was mainly due to increased earnings partly offset by the “above-target payout” for fiscal 2023 annual incentive compensation and higher capital expenditures.
Woodward did not repurchase any shares in the quarter under review. Management recently approved a new three-year stock repurchase program, allowing the company 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 in stock.
During the fiscal first quarter, the company paid dividends worth $13 million. Recently, it declared a dividend of 25 cents per share, up by about 14% compared with the previous quarter's 22 cents. This dividend will be paid on Mar 5, 2024, to shareholders as of Feb 20, 2024.
Fiscal 2024 Outlook
Net sales are now expected in the $3.15-$3.3 billion band. Earlier, net sales were forecast to be between $3.1 billion and $3.25 billion. The Zacks Consensus Estimate is pegged at $3.19 billion.
Adjusted free cash flow is projected to be between $300 million and $350 million (previous projection: in the range of $275-$325 million).
Earnings are suggested to be between $5.00 per share and $5.40 per share. Earlier, earnings per share were forecast between $4.75 and $5.20. The Zacks Consensus Estimate is pegged at $4.95.
Aerospace segment revenues are anticipated to increase in the range of 10-14%. Industrial segment revenues are expected to increase in the range of 8-10% compared with previous guided range of 4-6%.
Woodward currently flaunts a Zacks Rank #1 (Strong Buy).
Other Stocks to Consider
Other stocks worth consideration in the broader technology space are Watts Water Technologies WTS, NETGEAR NTGR and Blackbaud BLKB. While NETGEAR currently sports a Zacks Rank #1, Watts Water and Blackbaud carry a Zacks Rank of 2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Watts Water Technologies’ 2023 EPS has improved by 1.1% in the past 60 days to $8.09. WTS’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 11.8%. Shares of WTS have jumped 23.9% in the past year.
The Zacks Consensus Estimate for 2023 is pegged at a loss of 9 cents per share for NETGEAR, which remained unchanged in the past 30 days. NTGR’s earnings outpaced the Zacks Consensus Estimate in three of the last four quarters while missing once. The average surprise was 127.5%. Shares of NTGR were down 25.7% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2023 EPS has improved by 1% in the past 60 days to $3.86. BLKB’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 10.6%. Shares of BLKB have gained 35.3% in the past year.
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