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Woodward (WWD) Stock Up 54% in a Year: Will the Rally Last?
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Woodward's (WWD - Free Report) shares have been performing well on the trading front, with a gain of 53.9% in the past year compared with 23.6% and 22.4% growth of the S&P 500 composite and the sub-industry, respectively.
WWD is a leading designer, manufacturer and service provider of energy control and optimization solutions. The company provides a wide array of products for fuel, combustion, fluid, actuation and electronic applications, which serve the commercial aerospace, business jet, military and energy markets.
Solid financial performance is driving a good run on the trading front. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 26.1%.
Image Source: Zacks Investment Research
Factors Driving Performance
Woodward’s performance is being driven by robust end-market demand, price realization, productivity and efficiency improvements. WWD serves the aerospace and energy markets through two reportable segments: Aerospace and Industrial.
Woodward’s Industrial business segment is gaining from solid demand for power generation, especially in Asia and continued requirement for backup power for data centers. Higher demand for alternative fuels across the marine industry, momentum in the global marine market brought on by higher utilization and rising shipbuilding rates are other tailwinds. In the last reported quarter, this segment comprised 40.4% of the total revenues.
For fiscal 2024, the Industrial segment revenues are expected to increase in the range of 13-15% compared with the prior guided range of 8-10%.
The Aerospace segment benefits from higher commercial OEM and commercial aftermarket sales attributed to improving passenger traffic and aircraft utilization. Defense OEM sales also improved on the back of higher ground vehicles. Defense aftermarket sales benefited from supply-chain stabilization and higher output. In the last reported quarter, Aerospace comprised 59.6% of the total revenues.
The Aerospace segment’s 2024 revenues are now expected to increase in the range of 12-14% compared with the previous guided range of 10-14%.
However, Woodward faces a few headwinds which could weigh down on the top-line performance.
The volatile China on-highway natural gas truck market, global macroeconomic weakness and rising costs remain concerns. Sales for on-highway natural gas trucks in China were $65 million in the second quarter. However, management expects sales in the fiscal third quarter between $35 million and $40 million.
The recent pause by the U.S. government for further LNG export approvals has made the investment scenario of the LNG development market uncertain. Weakness in guided weapons sales is an added concern for this Zacks Rank #3 (Hold) stock.
Encouraging Estimate Revision Activity
The Zacks Consensus Estimate for the bottom line has been moving northward, reflecting analysts’ optimism.
The Zacks Consensus Estimate for WWD’s fiscal 2024 and 2025 earnings per share (EPS) is pegged at $5.88 and $6.24, respectively, implying a rise of 39.7% and 6.1%, from the prior-year actuals.
The Zacks Consensus Estimate for fiscal 2024 and 2025 EPS has increased 11.4% and 8%, respectively, in the past 90 days.
Woodward’s long-term earnings growth rate is pegged at 16.5%.
The Zacks Consensus Estimate for WWD’s fiscal 2024 and 2025 revenues is pegged at $3.3 billion and $3.47 billion, respectively, indicating growth of 13.2% and 5.3%, from the year-ago levels.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 EPS is pegged at $2.68, unchanged in the past 30 days. NVIDIA’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 18.4%. The long-term earnings growth rate is 37.6%. Shares of NVDA have risen 166.2% in the past year.
The Zacks Consensus Estimate for Onto Innovation’s 2024 EPS is pegged at $5.05, unchanged in the past 30 days. ONTO’s earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing the remaining one, with the average surprise being 2.6%. Shares of ONTO have gained 108.8% in the past year.
The Zacks Consensus Estimate for Generac’s 2024 EPS is pegged at $6.14. GNRC’s earnings beat the Zacks Consensus Estimate in two of the last four quarters while missing in the remaining quarters, with the average surprise being 5.8%. The long-term earnings growth rate is 12%. Shares of GNRC have risen 10.5% in the past year.
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Woodward (WWD) Stock Up 54% in a Year: Will the Rally Last?
Woodward's (WWD - Free Report) shares have been performing well on the trading front, with a gain of 53.9% in the past year compared with 23.6% and 22.4% growth of the S&P 500 composite and the sub-industry, respectively.
WWD is a leading designer, manufacturer and service provider of energy control and optimization solutions. The company provides a wide array of products for fuel, combustion, fluid, actuation and electronic applications, which serve the commercial aerospace, business jet, military and energy markets.
Solid financial performance is driving a good run on the trading front. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 26.1%.
Image Source: Zacks Investment Research
Factors Driving Performance
Woodward’s performance is being driven by robust end-market demand, price realization, productivity and efficiency improvements. WWD serves the aerospace and energy markets through two reportable segments: Aerospace and Industrial.
Woodward’s Industrial business segment is gaining from solid demand for power generation, especially in Asia and continued requirement for backup power for data centers. Higher demand for alternative fuels across the marine industry, momentum in the global marine market brought on by higher utilization and rising shipbuilding rates are other tailwinds. In the last reported quarter, this segment comprised 40.4% of the total revenues.
For fiscal 2024, the Industrial segment revenues are expected to increase in the range of 13-15% compared with the prior guided range of 8-10%.
The Aerospace segment benefits from higher commercial OEM and commercial aftermarket sales attributed to improving passenger traffic and aircraft utilization. Defense OEM sales also improved on the back of higher ground vehicles. Defense aftermarket sales benefited from supply-chain stabilization and higher output. In the last reported quarter, Aerospace comprised 59.6% of the total revenues.
The Aerospace segment’s 2024 revenues are now expected to increase in the range of 12-14% compared with the previous guided range of 10-14%.
However, Woodward faces a few headwinds which could weigh down on the top-line performance.
The volatile China on-highway natural gas truck market, global macroeconomic weakness and rising costs remain concerns. Sales for on-highway natural gas trucks in China were $65 million in the second quarter. However, management expects sales in the fiscal third quarter between $35 million and $40 million.
The recent pause by the U.S. government for further LNG export approvals has made the investment scenario of the LNG development market uncertain. Weakness in guided weapons sales is an added concern for this Zacks Rank #3 (Hold) stock.
Encouraging Estimate Revision Activity
The Zacks Consensus Estimate for the bottom line has been moving northward, reflecting analysts’ optimism.
The Zacks Consensus Estimate for WWD’s fiscal 2024 and 2025 earnings per share (EPS) is pegged at $5.88 and $6.24, respectively, implying a rise of 39.7% and 6.1%, from the prior-year actuals.
The Zacks Consensus Estimate for fiscal 2024 and 2025 EPS has increased 11.4% and 8%, respectively, in the past 90 days.
Woodward’s long-term earnings growth rate is pegged at 16.5%.
The Zacks Consensus Estimate for WWD’s fiscal 2024 and 2025 revenues is pegged at $3.3 billion and $3.47 billion, respectively, indicating growth of 13.2% and 5.3%, from the year-ago levels.
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are NVIDIA Corporation (NVDA - Free Report) , Generac Holdings (GNRC - Free Report) and Onto Innovation (ONTO - Free Report) . While NVIDIA sports a Zacks Rank #1 (Strong Buy), GNRC and ONTO carry a Zacks Rank #2 (Buy) each, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 EPS is pegged at $2.68, unchanged in the past 30 days. NVIDIA’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 18.4%. The long-term earnings growth rate is 37.6%. Shares of NVDA have risen 166.2% in the past year.
The Zacks Consensus Estimate for Onto Innovation’s 2024 EPS is pegged at $5.05, unchanged in the past 30 days. ONTO’s earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing the remaining one, with the average surprise being 2.6%. Shares of ONTO have gained 108.8% in the past year.
The Zacks Consensus Estimate for Generac’s 2024 EPS is pegged at $6.14. GNRC’s earnings beat the Zacks Consensus Estimate in two of the last four quarters while missing in the remaining quarters, with the average surprise being 5.8%. The long-term earnings growth rate is 12%. Shares of GNRC have risen 10.5% in the past year.