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Woodward (WWD) to Report Q3 Earnings: What's in the Offing?

Zacks Equity Research

Woodward, Inc. WWD is scheduled to report third-quarter fiscal 2019 results after the closing bell on Aug 5. In the last reported quarter, the company delivered a positive earnings surprise of 33.3%. Notably, Woodward surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters, the average beat being 19.5%.

For the fiscal third quarter, the company is likely to report higher revenues on a year-over-year basis, supported by a healthy growth trajectory.

Factors to Consider

Woodward has been investing significantly in technologies to secure fresh businesses. It is spending on new manufacturing units and automation equipment to perk up efficiency levels and accelerate production. Woodward continues to focus on diversifying its revenue stream. Its strategic plan to become a systems integrator has increased contract flow substantially, enabling it to capture a larger market share in the wide-body commercial aircraft field.

Notably, the commercial aerospace market is expanding substantially, driven by record passenger and cargo traffic and ongoing elevated load factors. Increased production in this space has been observed as aircraft operators continue to take delivery of new aircraft models that are more fuel efficient. Driven by the strong demand for smart weapons, the company is witnessing continued increase in defense sales that’s coming from both domestic and foreign military sales. However, commercial aftermarket growth is expected to be moderate driven by the potential for lower initial provisioning due to the grounding of the Boeing 737 MAX.

While the industrial turbine market remains uncertain, the company is witnessing robust growth in distributed power for data center applications. Significant infrastructure investments in pipelines, processing plants, LNG tankers, and terminals have increased the availability and utilization of natural gas as an emissions-friendly source of energy. Growth in Internet traffic and data storage is also driving demand for data center power generation.

All these measures are likely to get reflected in the upcoming results. The Zacks Consensus Estimate for total revenues for the fiscal third quarter is pegged at $700 million. In the year-earlier quarter, it generated revenues of $588 million.

Earnings Whispers

Our proven model shows that Woodward is likely to beat earnings in the quarter as it possesses the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is perfectly the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +5.13% with the former pegged at $1.23 and the latter at $1.17. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Woodward, Inc. Price and EPS Surprise

 

Woodward, Inc. Price and EPS Surprise

Woodward, Inc. price-eps-surprise | Woodward, Inc. Quote

Zacks Rank: Woodward has a Zacks Rank #3. This increases the predictive power of our model and a positive ESP makes us reasonably confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
   
Other Stocks to Consider

Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ciena Corporation CIEN is set to release quarterly numbers on Aug 29. It has an Earnings ESP of +5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Momo Inc. MOMO is +1.35% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Aug 28.

The Earnings ESP for Avalara, Inc. AVLR is +21.05% and it carries a Zacks Rank of 3. The company is slated to report quarterly numbers on Aug 7.

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