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Woodward, Inc. (WWD)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 delivered solid execution: revenue $884M (+6% YoY), GAAP EPS $1.78 (+14%), adjusted EPS $1.69 (+4%), and Aerospace segment margin expanded to 22.2% (+240 bps), while Industrial margin compressed to 14.3% (-500 bps) .
  • Woodward raised the low end of FY2025 guidance: sales to $3.375–$3.5B and adjusted EPS to $5.95–$6.25; Aerospace sales growth guided up to 8–13%, Industrial down 7–9% (margins unchanged), citing tariff headwinds but manageable footprint .
  • The quarter featured strength in Defense OEM (+52% YoY), robust commercial aftermarket (+23%), and pricing tailwinds (~7% price at company level), offset by Commercial OEM (-9%) and China on-highway weakness (Industrial Transportation -18%) .
  • Versus S&P Global consensus, Q2 beat on revenue and EPS: revenue $883.6M vs $835.0M*, EPS (adjusted) $1.69 vs $1.464*; management highlighted late-quarter MRO spare parts orders and Smart Defense as drivers* .
  • Stock-relevant narrative: management pulled up the bottom end of revenue/EPS ranges, reaffirmed top end, and flagged $10–$15M tariff pressure embedded in FY guide, plus expected moderation in commercial aftermarket growth in 2H .

Note: *Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Record Aerospace profitability: segment earnings $125M, margin 22.2% (+240 bps) on price realization and higher volume .
  • Defense OEM strength: sales up 52% YoY on Smart Defense; JDAM demand strong with higher-price lots expected to roll through in Q4 .
  • Commercial aftermarket robust: +23% YoY; management: “late in the quarter…drop-ins, spare parts orders from MRO facilities” boosted growth .
  • Pricing discipline: overall company price ~7%, with Aerospace stronger than Industrial; two solid quarters of pricing execution .

What Went Wrong

  • Commercial OEM down 9% YoY due to measured ramp post Boeing work stoppage; growth expected to return in 2H .
  • Industrial margin compression: Industrial margin fell to 14.3% (-500 bps) on lower China on-highway volume and unfavorable mix, despite price realization .
  • China on-highway drag: Transportation -18%; China on-highway sales $21M in Q2, -$45M YoY; management raised FY China on-highway outlook to ~$50M but still volatile .
  • Nonsegment expenses timing: adjusted nonsegment expenses rose to $34M, reflecting equity/LTI timing and portfolio actions (adjusted out), adding corporate headwind .

Financial Results

Headline Metrics (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$854.5 $772.7 $883.6
Diluted EPS (GAAP, $)$1.36 $1.42 $1.78
Adjusted EPS ($)$1.41 $1.35 $1.69
EBIT ($USD Millions)$113.0 $112.8 $143.8
Adjusted EBIT ($USD Millions)$117.4 $107.0 $136.5
Effective Tax Rate (%)18.0% 14.5% 18.1%

Consensus vs Actual (S&P Global, Q2 2025)

MetricEstimateActualSurprise
Revenue ($USD Millions)835.0*883.6 +5.8%*
Primary EPS ($)1.464*1.69 +15.4%*

Note: *Values retrieved from S&P Global.

Segment Breakdown (Revenue, $USD Millions)

SegmentQ4 2024Q1 2025Q2 2025
Aerospace – Commercial OEM$194 $154 $167
Aerospace – Commercial Aftermarket$174 $164 $202
Aerospace – Defense OEM$126 $113 $138
Aerospace – Defense Aftermarket$59 $63 $54
Aerospace – Total$553 $494 $562
Industrial – Transportation$131 $117 $142
Industrial – Power Generation$109 $105 $111
Industrial – Oil & Gas$62 $57 $69
Industrial – Total$302 $279 $322

Margins by Segment

MetricQ4 2024Q1 2025Q2 2025
Aerospace Segment Margin %19.2% 19.2% 22.2%
Industrial Segment Margin %12.6% 14.4% 14.3%

KPIs

KPIQ4 2024Q1 2025Q2 2025
Cash from Operations ($M)$142 $35 $78
Free Cash Flow ($M)$118 $1 $59
Capital Expenditures ($M)$24 $33.6 $18
Dividends Paid ($M)$15 $15 $17
Share Repurchases ($M)$86 $35 $44
EBITDA Leverage (x)1.4x 1.5x 1.5x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Sales ($B)FY2025$3.300–$3.500 $3.375–$3.500 Raised low end
Adjusted EPS ($)FY2025$5.85–$6.25 $5.95–$6.25 Raised low end
Adjusted Effective Tax RateFY2025~19% ~19% Maintained
Free Cash Flow ($M)FY2025$350–$400 $350–$400 Maintained
Capital Expenditures ($M)FY2025~$115 ~$115 Maintained
Diluted Shares (M)FY2025~61.5 ~61.5 Maintained
Aerospace Sales GrowthFY2025Up 6%–13% Up 8%–13% Raised
Aerospace Segment Earnings (% of Sales)FY202520%–21% 20%–21% Maintained
Industrial Sales GrowthFY2025Down 7%–11% Down 7%–9% Raised low end
Industrial Segment Earnings (% of Sales)FY202513%–14% 13%–14% Maintained
Quarterly Dividend per Share ($)Current$0.25 (prior quarter) $0.28 (declared Apr 24, 2025) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 & Q1’25)Current Period (Q2’25)Trend
Supply chain & leanPost‑COVID supply chain not back to normal; investment in flexible insourcing; Kaizen/automation; pricing improvements Continued supplier quality improvements (Smart Defense); model line transformations; record plant sales (Rockford, Zeeland) Improving operationally, lingering constraints
Commercial aftermarketStrong utilization; high shop visits; expected moderation vs easy comps +23% YoY; late‑quarter MRO spare parts “drop‑ins” drove strength; 2H growth to moderate to high single digits Strong but moderating in 2H
Defense OE (Smart Defense)Robust demand expected; pricing improvements late FY25/early FY26 +52% YoY; major growth driver; JDAM higher-price lots in Q4 Accelerating in FY25
Commercial OEMDown in Q1 (Boeing stoppage); ramp expected in 2H -9% in Q2; ramp expected in back half Recovery expected 2H
Tariffs & macroLimited risk given in‑region production; fluid environment $10–$15M tariff pressure embedded in FY guide; reaffirmed top end, raised low end; no escalation assumed Manageable, monitored
China on‑highwayAnticipated significant decline; minimal Q2; $40M FY guide $21M in Q2; FY outlook raised to ~$50M; still volatile Slightly better than plan, volatile
LEAP/GTF aftermarketGrowing off low base; modeled to equal legacy narrowbody volumes ~FY2028 LRU inputs doubled YoY again; trend continues; contribution growing Building toward scale
Data centers/power genStrong long‑term demand; capacity additions; bullish market Increased output 20–50% in gas turbine systems; data center power demand opportunity Strengthening

Management Commentary

  • “Net sales were up 6% year-over-year. Adjusted earnings per share were up 4%, reflecting steady growth despite headwinds from China on-highway” .
  • “Aerospace segment sales…Defense OEM up 52%…Commercial aftermarket up 23%…Commercial OEM down 9%…Defense aftermarket down 8%” .
  • “Earnings in Aerospace were the highest on record at $125M…Margins expanded 240 bps to 22.2%” .
  • “We are raising the low end of our sales and adjusted EPS guidance while reaffirming the other elements of our full year outlook” .
  • “We feel like we have $10M to $15M of [tariff] pressure…we have baked it into our guidance” .
  • “Overall price was about 7% at the Woodward level; Aero price stronger than Industrial” .
  • “LRU inputs and return shipments to customers doubled again year-over-year in the second quarter” .

Q&A Highlights

  • Commercial aftermarket spike driven by late-quarter MRO spare parts “drop-ins”; management expects moderation to high single-digit growth in 2H .
  • Aerospace margin incrementals to moderate from >40% in H1 to ~30–35% in H2 as Defense OE mix rises and tariffs modestly impact results .
  • China on-highway: Q2 $21M; FY outlook lifted to ~$50M (vs prior ~$40M); volatility continues .
  • Marine transportation backlog: OE visibility extends to ~2029 shipbuild slots; aftermarket risk if trade tensions persist .
  • JDAM program: strong demand and healthy supply chain; higher-pricing lots expected to roll through in Q4 .
  • Boeing/787: meeting GE GENX order rates; bullish on capacity to support potential rate of seven per month later this year .

Estimates Context

  • S&P Global consensus for Q2 FY2025: EPS 1.464 and revenue $835.0M; actuals were adjusted EPS $1.69 and revenue $883.6M—both beats*. Management’s commentary points to MRO spare parts orders, Smart Defense strength, and price realization as drivers .
  • Prior quarters vs S&P: Q4 FY2024 actual EPS $1.41 vs est. 1.260; revenue $854.5M vs est. $811.1M*; Q1 FY2025 EPS $1.35 vs est. 1.198; revenue $772.7M vs est. $770.0M*.
  • Guidance implications: Raised low end of FY sales/EPS; consensus may need to reflect stronger Defense OE mix and embedded tariff costs, alongside expected 2H moderation in commercial aftermarket .

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat vs consensus: Q2 revenue and adjusted EPS exceeded S&P Global estimates, supported by Smart Defense, pricing, and late-quarter aftermarket demand .
  • Margin expansion where it matters: Aerospace margin reached 22.2% with record earnings; H2 incrementals likely normalize to 30–35% given mix/tariffs .
  • Guidance confidence with risk management: Low end of FY sales/EPS raised; tariff impact ($10–$15M) is in the numbers; top end reaffirmed .
  • Aftermarket trajectory: Expect moderation in commercial services growth in H2; watch for MRO spare parts ordering cadence and China spare end items softness .
  • Defense tailwinds: JDAM pricing uplift in Q4 and Smart Defense breadth support H2 growth and margin leverage .
  • Industrial stabilization ex-China: Core Industrial margins 14–15% for FY; Transportation headwind persists, but power gen and oil & gas resilient .
  • Capital returns remain robust: $61M returned in Q2 ($44M buybacks, $17M dividends); quarterly dividend at $0.28 as of April 24, 2025 .

Appendix: Additional Q2 Materials

  • Q2 press release (financial tables, segment detail, reconciliations) .
  • 8‑K furnishing press release and reiterating items 2.02/9.01 .
  • Dividend declaration (Apr 24, 2025) .
  • Trend context: Q1 FY2025 press release & transcript; Q4 FY2024 press release .