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Woodward, Inc. (WWD)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered record sales and EPS, both ahead of consensus: Revenue $915.4M vs $889.2M consensus and Diluted EPS $1.76 vs $1.645 consensus; Aerospace drove growth with 21.1% segment margin, while Industrial margin compressed on China on-highway weakness . EPS/Revenue consensus from S&P Global*.
  • Full-year guidance raised: Sales to $3.45–$3.525B, Adjusted EPS to $6.50–$6.75, Aerospace margin to 21–21.5%, Industrial margin to ~14.5%; Adjusted ETR lowered to ~17%, but Free Cash Flow cut to $315–$350M due to higher working capital to support demand .
  • Strategic updates: Completed acquisition of Safran’s North American electromechanical actuation business (A350 HSTA content), and won Airbus A350 spoiler actuation (12 of 14 spoilers); management signaled a “couple hundred million” multi-year capex for a new U.S. spoiler facility (FY26–FY27) .
  • Near-term stock catalyst: Guidance raise and aero margin strength vs consensus beat; watch Q4 Aerospace incrementals and working-capital-driven FCF compression—management expects Q4 aero margins mid-22% exit and inventories to stabilize into 2026 .

What Went Well and What Went Wrong

  • What Went Well

    • Aerospace strength: Record Aerospace sales ($596M, +15% YoY) and margin expansion to 21.1% (↑140 bps) on price realization and volume; defense OEM +56% YoY, commercial aftermarket +30% YoY .
    • Commercial services momentum: LEAP/GTF aftermarket volumes are approaching legacy aftermarket levels, contributing meaningfully to aero services; crossover still expected ~2028 .
    • Strategic wins and portfolio building: Airbus A350 spoiler actuation award (12 of 14 spoilers) and Safran electromechanical actuation acquisition strengthen airframe pedigree ahead of next single-aisle competition .

  • What Went Wrong

    • Industrial drag: Segment margin fell to 14.9% (−320 bps YoY) with sales −3.2% YoY; China on-highway transportation down sharply (−69% YoY in Q2 commentary; Q3 transportation −12% YoY), driving unfavorable mix .
    • Free cash flow compression: Q3 FCF $99M (−27.8% YoY) and FY25 FCF guidance cut to $315–$350M on inventory build to support higher sales amid supply chain dynamics .
    • Mix pressure within Aerospace: Strong defense OEM growth carries lower margins vs portfolio average, tempering incrementals vs H1; management still expects Q4 aero incrementals back to H1 ranges as pricing on smart defense lots flows .

Financial Results

Headline actuals across recent quarters

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$772.7 $883.6 $915.4
Diluted EPS ($)$1.42 $1.78 $1.76
EBIT (Non-GAAP, $MM)$112.8 $143.8 $137.2
EBITDA (Non-GAAP, $MM)$140.7 $171.4 $165.9
Effective Tax Rate (%)14.5% 18.1% 14.5%

Actual vs Wall Street consensus (S&P Global) and deltas

MetricQ1 2025Q2 2025Q3 2025
Revenue Consensus Mean ($MM)*$770.0*$835.0*$889.2*
Revenue Actual ($MM)$772.7 $883.6 $915.4
Revenue Surprise ($MM)+$2.7*+$48.6*+$26.2*
EPS Consensus Mean ($)*$1.198*$1.464*$1.645*
Diluted EPS Actual ($)$1.35 $1.69 $1.76
EPS Surprise ($)+$0.15*+$0.23*+$0.12*
EBITDA Consensus Mean ($MM)*$132.7*$154.3*$171.9*
EBITDA Actual ($MM)$140.7 $171.4 $165.9
EBITDA Surprise ($MM)+$8.0*+$17.1*−$6.0*

Values retrieved from S&P Global*.

Segment trend (sales and margins)

SegmentQ1 2025 Sales ($MM)Q1 Margin %Q2 2025 Sales ($MM)Q2 Margin %Q3 2025 Sales ($MM)Q3 Margin %
Aerospace$493.9 19.2% $561.7 22.2% $596.0 21.1%
Industrial$278.8 14.4% $321.9 14.3% $319.5 14.9%

Q3 2025 segment breakdown (YoY)

Aerospace Sub-Segment ($MM)Q3 2025Q3 2024YoY %
Commercial OEM$175 $190 −7.6%
Commercial Aftermarket$215 $166 +30.0%
Defense OEM$150 $97 +55.7%
Defense Aftermarket$55 $66 −16.2%
Aerospace Total$596 $518 +15.2%
Aerospace Segment Margin21.1% 19.7% +140 bps
Industrial Sub-Segment ($MM)Q3 2025Q3 2024YoY %
Transportation$144 $163 −12.0%
Power Generation$109 $110 −0.2%
Oil & Gas$66 $57 +16.1%
Industrial Total$319 $330 −3.2%
Industrial Segment Margin14.9% 18.1% −320 bps

KPIs and cash returns

KPIQ1 2025Q2 2025Q3 2025
Cash from Operations ($MM)$35 $78 $126
Free Cash Flow ($MM)$1 $59 $99
Capital Expenditures ($MM)$33.6 $18.4 $26.5
Dividends Paid ($MM)$15 $17 $17
Share Repurchases ($MM)$35 $44 $45
Debt Leverage (EBITDA, x)1.5x 1.5x 1.5x

Guidance Changes

MetricPeriodPrevious Guidance (Apr 28, 2025)Current Guidance (Jul 28, 2025)Change
Total Sales ($B)FY25$3.375–$3.500 $3.450–$3.525 Raised
Adjusted EPS ($)FY25$5.95–$6.25 $6.50–$6.75 Raised
Adjusted Effective Tax Rate (%)FY25~19% ~17% Lowered
Adjusted Free Cash Flow ($MM)FY25$350–$400 $315–$350 Lowered
Capital Expenditures ($MM)FY25~$115 No change Maintained
Shares (Diluted, MM)FY25~61.5 No change Maintained
Aerospace Sales Growth (%)FY25Up 8–13% Up 11–13% Raised
Aerospace Segment Earnings (% of Sales)FY2520–21% 21–21.5% Raised
Industrial Sales Growth (%)FY25Down 7–9% Down 5–7% Raised (less negative)
Industrial Segment Earnings (% of Sales)FY2513–14% ~14.5% Raised
Dividend per shareQ3 2025—$0.28; payable Sep 4 (record Aug 21) Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Supply chain dynamicsPost-COVID supplier quality/labor challenges; in-region manufacturing footprint mitigates tariffs; 15–20 high-risk suppliers; aero OE impact from Boeing restart Airframers managing disruptions and inventory buffers; increased inventory investment to meet demand; vigilance on tariffs/geopolitics Stable headwinds; mitigation ongoing
Pricing realizationCompany-wide price ~6% in Q1; expected ~5% for FY; aero stronger than industrial Total business price ~7% YTD; aero > industrial; FY price closer to 7% Strengthening
LEAP/GTF aftermarketDoubling YoY off small base; meaningful growth expected through FY25–FY26 Volumes approaching legacy aftermarket; crossover still ~2028; correlated to hours/cycles more than shop visits Accelerating, near critical mass
Defense “smart” weapons (JDAM and others)Strong demand; higher price lots expected to start in Q4 Demand solid into H1 2026; pricing flowing on newer lots improves margins Sustained strength; improving price
Industrial: Power generation & data centersOperational improvements, 20–50% output increases; bullish long-term demand (recip engines/gas turbines) Glotton expansion ahead of schedule to serve data center backup; ordering machines and moving into new hall in Nov Capacity expanding
Marine transportationHealthy shipbuilding, extended OEM backlog; aftermarket risk if trade tensions escalate Demand exceptionally strong; >50% new ship orders include alternative fuel specs Strong; watch macro/trade
China on-highwayQ1 ~$10M; FY guide initially ~$40M; volatile with local economic challenges Q4 expected ~$10M; FY around ~$60M; remains subdued Persistent headwind
Automation & capexCobots/automation in Rock Cut; flexible insourcing investment Multi-year capex (“couple hundred million”) for A350 spoiler facility in US; adding manufacturing/supplier engineers Step-up planned FY26–27
Tax rateAdjusted ETR narrowed to ~19% in Q1 FY25 adjusted ETR cut to ~17%; lower rates driven by stock option tax benefits Lower tax rate in FY25

Management Commentary

  • “We’re pleased to report strong third-quarter results that exceeded our sales and earnings expectations… Aerospace record sales, up 15%, and aero margins expanded 140 bps to 21.1%.”
  • “Based on our strong year-to-date performance and solid fourth quarter outlook, we are raising our full-year sales and earnings guidance… lowering our full-year free cash flow guidance [to] support higher sales in a dynamic supply chain and production environment.”
  • On strategic wins: “We’ve been selected to provide spoiler control actuators for the Airbus A350… our first actuation LRU win for a primary flight control surface on a commercial platform.”
  • On LEAP/GTF aftermarket: “LEAP and GTF service activity continues to grow steeply… now approaching that of legacy products and delivering a meaningful impact to our aeroservices growth profile.”
  • On capex and facility: “These types of facilities tend to run a couple hundred million dollars that can be spread across a couple, three years… targeting 2028 entry into service for our hardware.”

Q&A Highlights

  • Aerospace margins and incrementals: Q3 incrementals moderated due to lower-margin defense OE mix; Q4 incrementals expected back to H1 ranges as smart defense pricing flows and aftermarket remains strong .
  • Working capital and FCF: Increased inventory to meet demand and de-risk supply chain visibility; expect improvement by 2026 as processes stabilize .
  • LEAP/GTF trajectory: Aftermarket volumes “in the same neighborhood” as legacy; crossover still ~2028; correlation more to hours/cycles than shop visits .
  • JDAM visibility: Demand strong through H1 2026; higher price lots begin in Q4, supporting margin .
  • Tax rate drivers: Lower FY25 ETR driven by stock option tax benefits amid record stock prices and higher net earnings .

Estimates Context

  • Q3 2025 beats vs consensus: Revenue $915.4M vs $889.2M consensus (+$26.2M) and Diluted EPS $1.76 vs $1.645 (+$0.12); estimate counts (EPS and Revenue) were 10 each *.
  • Across Q1–Q3, WWD beat EPS and revenue consensus each quarter; EBITDA beat in Q1/Q2 but missed in Q3 (company-reported EBITDA $165.9M vs $171.9M consensus; note differing non-GAAP methodologies) .
    Values retrieved from S&P Global    .
MetricQ1 2025Q2 2025Q3 2025
Revenue Consensus Mean ($MM)*$770.0*$835.0*$889.2*
Revenue Actual ($MM)$772.7 $883.6 $915.4
EPS Consensus Mean ($)*$1.198*$1.464*$1.645*
Diluted EPS Actual ($)$1.35 $1.69 $1.76
EBITDA Consensus Mean ($MM)*$132.7*$154.3*$171.9*
EBITDA Actual ($MM)$140.7 $171.4 $165.9

Key Takeaways for Investors

  • Quality beat and guidance raise: Strong Q3 execution with broad-based price realization; full-year sales/EPS/margins raised—supports positive estimate revisions and potential multiple support .
  • Watch Q4 aero margins: Management implies mid-22% exit rate; pricing on smart defense lots should aid incrementals—monitor defense OE mix impact vs aftermarket strength .
  • FCF compression near term: Inventory build to ensure delivery in dynamic supply chain cuts FY25 FCF; management expects normalization into 2026—near-term headwind for capital returns even as repurchases/dividends continue .
  • Strategic positioning ahead of next single-aisle: Airbus A350 spoiler actuation win and Safran EMA acquisition expand airframe content; planned “couple hundred million” capex in FY26–27 is growth/productivity focused .
  • Industrial thesis intact ex-China: Core Industrial margins ~15% with strength in power gen and marine; China on-highway remains volatile with limited visibility—focus on oil & gas/marine/data center exposure .
  • Pricing tailwind: Company-level price realization trending closer to ~7% FY25 (vs prior ~5%)—sustained driver for margins if volumes hold .
  • Tax rate benefit in FY25: Lower adjusted ETR (~17%) boosts EPS; benefit linked to stock options—assume reversion risk longer term .