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Woodward, Inc. WWD reported relatively modest fourth-quarter fiscal 2020 results, with net earnings and sales declining on a year-over-year basis due to severe volatility in its markets stemming from the COVID-19 pandemic. However, both the top and bottom line exceeded the respective Zacks Consensus Estimate backed by diligent execution of operational plans and prudent capital management.
On a GAAP basis, net earnings in the quarter were $57.2 million or 89 cents per share compared with $66.8 million or $1.03 per share in the year-ago quarter. The decline in earnings was primarily attributable to top-line contraction owing to the virus outbreak.
Excluding non-recurring items, adjusted net earnings for the reported quarter declined to $48.1 million or 75 cents per share from $78.7 million or $1.22 per share in the prior-year quarter. Nevertheless, the bottom line beat the Zacks Consensus Estimate by 21 cents.
In fiscal 2020, GAAP earnings were $240.4 million or $3.74 per share compared with $259.6 million or $4.02 per share in fiscal 2019, while adjusted earnings decreased to $254 million or $3.96 per share from $314.5 million or $4.88 per share in the respective periods.
Woodward, Inc. Price, Consensus and EPS Surprise
Woodward, Inc. price-consensus-eps-surprise-chart | Woodward, Inc. Quote
Net sales in the fiscal fourth quarter fell 27.9% year over year to $531.3 million due to lower sales in the Aerospace and Industrial segments on account of coronavirus adversities and lower oil prices. While commercial OEM and aftermarket sales were severely affected by the lockdown restrictions within the Aerospace segment, defense market witnessed decent growth due to upgrade and fleet readiness programs. Decline in oil and gas prices, along with weak customer demand due to the pandemic, led to lower sales in the Industrial segment. Nevertheless, the top line surpassed the consensus estimate of $520 million.
In fiscal 2020, net sales were $2,495.7 million compared with $2,900.2 million in fiscal 2019.
Aerospace: Net sales were down 33.5% year over year to $336.3 million led by lower commercial sales due to the decline in global passenger traffic and OEM production rates and plant closures. The segment continues to benefit from a strong defense market, which mitigated the significant impact of the rapid reduction in passenger traffic and aircraft production rates. The segment’s earnings were $58.5 million, down from $111.3 million in the year-ago quarter owing to lower sales volume, partially offset by cost reduction initiatives.
Industrial: Net sales totaled $194.9 million, down 15.5% year over year due to the impact of COVID-19 across the company’s markets, weakness in oil and gas as well as the divestiture of RPS. While results were affected by the economic slowdown, the divestiture of the renewables portfolio enhanced the segment’s profitability. The segment’s earnings were $18.7 million, up from $11 million in the year-ago quarter led by cost-cutting efforts.
Total expenses declined to $463.1 million from $660 million a year ago. Adjusted EBITDA came in at $98.3 million compared with $136.1 million in the year-ago quarter.
Cash Flow & Liquidity
In fiscal 2020, Woodward generated $349.5 million of net cash from operating activities compared with $390.6 million a year ago. Free cash flow in fiscal 2020 was $302.4 million compared with $291.5 million in fiscal 2019. As of Sep 30, 2020, the company had $153.3 million in cash and cash equivalents with $736.8 million of long-term debt (net of current portion) compared with respective tallies of $99.1 million and $864.9 million a year ago.
Due to lack of visibility amid economic disruptions stemming from the coronavirus-induced turmoil, Woodward did not provide any guidance for fiscal 2021. The company expects to emerge stronger from the crisis with a healthy balance sheet position and resilient business model.
Zacks Rank & Stocks to Consider
Woodward currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Badger Meter, Inc. BMI, Sensata Technologies Holding N.V. ST and Transcat, Inc. TRNS, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Badger Meter delivered a positive earnings surprise of 5.4%, on average, in the trailing four quarters.
Sensata has a long-term earnings growth expectation of 11%. It delivered a positive earnings surprise of 6.7%, on average, in the trailing four quarters.
Transcat has a long-term earnings growth expectation of 8%. It delivered a positive earnings surprise of 93.4%, on average, in the trailing four quarters.
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