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Woodward, Inc. (WWD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 net sales were $773M (-2% YoY) and diluted EPS $1.42 (-3% YoY); adjusted EPS was $1.35 (-7% YoY). Management said results were in line with expectations and reaffirmed full-year guidance, narrowing adjusted EPS to $5.85–$6.25 on a lower adjusted tax rate (~19%) .
  • Aerospace outperformed with revenue up 7% to $494M and margin up 200 bps to 19.2% on price realization; Industrial revenue fell 15% to $279M with margin down 610 bps to 14.4% due to lower China on-highway volumes and mix pressure .
  • Cash from operations was $35M and free cash flow $1M, in line with typical first-quarter seasonality; leverage stood at ~1.5x EBITDA. The company returned $50M in Q1 via $35M buybacks and $15M dividends, and increased its quarterly dividend 12% to $0.28 per share (payable March 6, 2025) .
  • Key catalysts: strong defense OEM demand and robust commercial aftermarket, Boeing restart into Q2 and 2H ramp, disciplined pricing (~6% in Q1, ~5% FY), and dividend increase; risks include supply chain constraints and China on-highway volatility .

What Went Well and What Went Wrong

What Went Well

  • Aerospace delivered growth across commercial aftermarket (+19%), defense OEM (+21%), and defense aftermarket (+8%), driving segment margin expansion to 19.2% on price realization .
  • Management highlighted execution and lean improvements, including Kaizen events and automation (Rock Cut Campus deburring cobots), enabling improved flow and productivity despite Boeing delivery pauses .
  • Capital returns and dividend policy were supportive: $35M buybacks and $15M dividends in Q1, with a 12% dividend increase to $0.28 per share .

What Went Wrong

  • Industrial segment revenue declined 15% and margin fell 610 bps to 14.4% due to a $65M YoY decline in China on-highway sales and unfavorable mix; China on-highway sales were $10M in Q1, with FY outlook ~ $40M .
  • Free cash flow fell to $1M (-81% YoY) on lower earnings; cash from operations declined 26% to $35M, consistent with typical Q1 seasonality but a headwind nonetheless .
  • Ongoing supply chain/labor challenges post-COVID continued to pressure output and quality, with ~15–20 suppliers on a highly escalated list across Aerospace and Industrial .

Financial Results

Consolidated Performance vs Prior Quarters

MetricQ4 2024Q1 2025Q2 2025
Net Sales ($USD Millions)$855 $773 $883.6
Diluted EPS ($)$1.36 $1.42 $1.78
Adjusted EPS ($)$1.41 $1.35 $1.69
EBIT ($USD Millions)N/A$112.8 $143.8
Adjusted EBIT ($USD Millions)N/A$107.0 $136.5
Effective Tax Rate (%)18.0% 14.5% 18.1%
Adjusted Effective Tax Rate (%)18.4% 14.0% 17.7%

Notes: Q4 2024 EBIT/Adj EBIT not disclosed in transcript; Q1 and Q2 values per exhibits/press releases.

Segment Revenue and Margins

SegmentQ4 2024 Revenue ($M)Q4 2024 Margin (%)Q1 2025 Revenue ($M)Q1 2025 Margin (%)Q2 2025 Revenue ($M)Q2 2025 Margin (%)
Aerospace$553 19.2% $493.9 19.2% $561.7 22.2%
Industrial$302 12.6% $278.8 14.4% $321.9 14.3%
Total$855 N/A$772.7 N/A$883.6 N/A

Q1 2025 Aerospace Sub-Segment Detail (YoY)

Sub-SegmentQ1 2025 ($M)YoY Change (%)
Commercial OEM$154 -10%
Commercial Aftermarket$164 +19%
Defense OEM$113 +21%
Defense Aftermarket$63 +8%
Total Aerospace$494 +7%

Q1 2025 Industrial Sub-Segment Detail (YoY)

Sub-SegmentQ1 2025 ($M)YoY Change (%)
Transportation$117 -33%
Power Generation$105 +7%
Oil & Gas$57 +7%
Total Industrial$279 -15%

Q1 2025 KPIs and Cash Flow

KPIQ1 FY2024Q1 FY2025
Cash from Operations ($M)$47 $35
Free Cash Flow ($M)$5 $1
Dividends Paid ($M)$13 $15
Share Repurchases ($M)$0 $35
Total Debt ($M)$719 $902
EBITDA Leverage (x)1.3x 1.5x
China On-Highway Sales ($M)N/A$10

Actual vs Consensus (Q1 2025)

MetricActualConsensus
Revenue ($M)$773 Unavailable (attempt via S&P Global failed; see Estimates Context)
Diluted EPS ($)$1.42 Unavailable (attempt via S&P Global failed; see Estimates Context)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Sales ($B)FY2025$3.3–$3.5 (Nov 25, 2024) $3.3–$3.5 (Feb 3, 2025) Maintained
Adjusted EPS ($)FY2025$5.75–$6.25 (Nov 25, 2024) $5.85–$6.25 (Feb 3, 2025) Narrowed up $0.10 on lower tax
Adjusted Effective Tax Rate (%)FY2025~20% (Nov 25, 2024) ~19% (Feb 3, 2025) Lowered
Free Cash Flow ($M)FY2025$350–$400 (Nov 25, 2024) $350–$400 (Feb 3, 2025) Maintained
Capital Expenditures ($M)FY2025~$115 (Nov 25, 2024) ~$115 (Feb 3, 2025) Maintained
Shares (Diluted, M)FY2025~61.5 (Nov 25, 2024) ~61.5 (Feb 3, 2025) Maintained
Aerospace Sales Growth (%)FY2025Up 6%–13% (Nov 25, 2024) Up 6%–13% (Feb 3, 2025) Maintained
Aerospace Segment Margin (%)FY202520%–21% (Nov 25, 2024) 20%–21% (Feb 3, 2025) Maintained
Industrial Sales Growth (%)FY2025Down 7%–11% (Nov 25, 2024) Down 7%–11% (Feb 3, 2025) Maintained
Industrial Segment Margin (%)FY202513%–14% (Nov 25, 2024) 13%–14% (Feb 3, 2025) Maintained
Total Sales ($B)FY2025$3.3–$3.5 (Feb 3, 2025) $3.375–$3.5 (Apr 28, 2025) Raised low end
Adjusted EPS ($)FY2025$5.85–$6.25 (Feb 3, 2025) $5.95–$6.25 (Apr 28, 2025) Raised low end
Industrial Sales Growth (%)FY2025Down 7%–11% (Feb 3, 2025) Down 7%–9% (Apr 28, 2025) Improved
Aerospace Sales Growth (%)FY2025Up 6%–13% (Feb 3, 2025) Up 8%–13% (Apr 28, 2025) Improved
Dividend per Share ($)Q1 FY2025$0.25 (prior quarter) $0.28 (payable Mar 6, 2025) Raised 12%

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q2 2025)Current Period (Q1 2025)Trend
Boeing/Commercial OEDirect-to-Boeing lines paused; cautious restart assumptions; wider aero guide due to Boeing wildcard Confident managing tariffs; raised low end of sales/EPS; aero growth led by smart defense, aftermarket; commercial OEM down 9% YoY in Q2 Boeing restart signal “pretty strong”; expect OE to return to growth in 2H25; commercial OEM down 10% in Q1 Improving into 2H25 contingent on supply chain
Supply Chain/LaborPost-COVID constraints persist; supplier simplification; Rapid Response machining Not specifically discussed in PR; tariffs addressed 15–20 suppliers escalated; insourcing via flexible equipment; quality challenges with less experienced labor Incremental improvement, still a headwind
Pricing RealizationFY2025 price ~5%; aero stronger than industrial N/A (PR—no explicit rate)Q1 price ~6% total; FY guide ~5%; aero expected stronger Positive tailwind
Defense OEM/Smart DefenseQ4 defense OEM +40%; strong demand into FY2025; margin improvement expected late 2025/early 2026 on repricing Q2 aero growth driven by smart defense; defense aftermarket down 8% YoY Strong Q1 +21% defense OEM; bookings visibility limited past early 2026 Robust demand; margin uplift later
Commercial AftermarketTight MRO capacity; expect leveling at high plateau; still growth with price Q2 commercial aftermarket +23% YoY Q1 +19%; correlated to engine hours; LEAP/GTF growing off low base Strong but moderating on tougher comps
China On-HighwayFY2025 outlook ~$40M; volatility; breakeven ~ $15M/quarter Q2 transportation down 18% YoY; YTD transportation down 26% Q1 sales $10M; minimal Q2 then $10–$15M per quarter in Q3–Q4 Weak; gradual improvement later FY
Power Generation/Data Centers/AIExpect low double-digit power gen growth; AI/data center demand rising Industrial growth in power gen; confident managing tariffs Robust power gen demand; bullish on gas renaissance for grid stability and AI/data center loads Secular tailwind building
Tariffs/MacroN/ACompany raising low end and confident managing announced tariffs Limited tariff risk due to regionalized footprint; fluid environment Managed but watchful

Management Commentary

  • “Our Aerospace segment performed well with growth in both sales and margin despite a pause in deliveries for some Boeing product lines and a reduced delivery rate in others” .
  • “Core Industrial performance was strong… offset by an expected decline in sales related to China on-highway natural gas trucks” .
  • “The Boeing demand signal is pretty strong… we are responding in a disciplined way to bring our line rates up” .
  • “For the quarter, at the total Woodward level, [pricing] came in around 6%… total guide for the year is around 5%” .
  • “We continue to anticipate robust growth in smart defense… expect margin expansion from improved pricing in late 2025, and or early 2026” .
  • “Global demand for power generation capacity remains robust… demand for data center power generation is expected to increase significantly” .

Q&A Highlights

  • Aerospace guidance and mix: Defense OEM expected to be largest growth driver in FY2025; commercial aftermarket strength moderating on tougher comps; commercial OE expected to grow in 2H25 .
  • Supply chain normalization: Post-COVID challenges persist; ~15–20 escalated suppliers; insourcing with flexible equipment running 5 days/week, 2 shifts .
  • LEAP/GTF aftermarket: Growing nicely off a low base; meaningful contribution expected as fleet matures toward 2027–2028 timeframe .
  • Pricing realization: Q1 ~6% at total company; aero stronger than Industrial; contract renegotiations supporting price .
  • China on-highway trajectory: Minimal Q2, $10–$15M per quarter in Q3–Q4; FY ~ $40M .
  • Tariffs exposure: Regional manufacturing footprint limits immediate tariff risk; environment fluid .
  • Capital allocation: ~$215M planned returns in 2025 ($150M repurchases, $65M dividends); potential to do more depending on opportunities .

Estimates Context

  • We attempted to retrieve S&P Global consensus estimates (EPS and Revenue for Q1 FY2025 and forward periods), but SPGI returned an error due to exceeded daily request limit; therefore, Wall Street consensus numbers were unavailable for comparison at this time [SPGI error from tool].
  • Given Q1 results were “in line with expectations” and FY2025 guidance was narrowed on a lower adjusted tax rate, Street models likely require only modest adjustments to tax rate and adjusted EPS band; later (Q2) the low end of sales and EPS guidance was raised, suggesting upward bias to consensus for the year .

Key Takeaways for Investors

  • Aerospace strength and pricing power underpin margin expansion; defense OEM is the 2025 growth leader, with commercial OE ramp contingent on Boeing and supply chain performance .
  • Commercial aftermarket remains robust but should moderate from high double-digit growth due to capacity constraints and tougher comps; still supported by engine hours and LEAP/GTF maturation .
  • Industrial headwinds are largely isolated to China on-highway; core Industrial margins at ~14%–15% with FX benefit in Q1; expect improvement with mix and volume later in FY .
  • Disciplined pricing (~5% FY) and lean/automation initiatives provide structural margin tailwinds across segments .
  • Capital returns remain robust with buybacks and a 12% dividend increase; balance sheet leverage ~1.5x EBITDA, enabling both returns and bolt-on M&A (e.g., Safran electromechanical actuation assets) .
  • Watchpoints: supply chain quality/output, Boeing production cadence, tariff developments, and China macro; management appears confident in managing these within current guidance bands .
  • Near-term trading: limited estimate variability given “in line” print and reaffirmed FY guide; positive skew from dividend hike and raised low end of FY guide in Q2; medium-term thesis levered to defense OEM momentum, aero pricing/margins, and data center-driven power gen demand .