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Woodward Surges 25% Year to Date: What Lies Ahead for the Stock?
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Woodward’s (WWD - Free Report) shares have been performing well on the trading front, with a gain of 24.7% year to date compared with the S&P 500 composite and the sub-industry’s growth of 19.9% and 13.5%, respectively.
The stock closed the last trading session at $169.81, 9.8% below its 52-week high of $188.35, reached on June 3, 2024.
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 18.5%.
YTD Price Performance
Image Source: Zacks Investment Research
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.
WWD Gains From Momentum in Aerospace Segment
Woodward’s performance is being driven by robust end-market demand and price realization, productivity and efficiency improvements. It serves the aerospace and energy markets through two reportable segments: Aerospace and Industrial.
The Aerospace segment benefits from higher commercial OEM and aftermarket sales attributed to improving passenger traffic and aircraft utilization. Defense aftermarket sales rose 22% in the last reported quarter driven by supply-chain stabilization and higher output.
In the third quarter of fiscal 2024, net sales for the segment were $518 million, up 8% year over year. Aerospace comprised 61% of the total revenues in the last reported quarter.
Revenues from the Aerospace business are expected to improve in the upcoming quarters driven by strength in commercial markets as well as higher defense activity.
For fiscal 2024, Aerospace segment revenues are anticipated to increase in the range of 12-14%, unchanged from previous guidance. Despite supply chain disruptions, management remains confident of achieving revenues within the guided range.
WWD’s Industrial Unit Gains From Demand for Power Generation
Nonetheless, solid demand for power generation and continued requirement for backup power in data centers is likely to cushion revenues from the Industrial segment. Higher power demand to support grid stability is another tailwind. Increasing demand for alternative fuels across the marine industry, as well as momentum in the global marine market brought on by higher utilization and rising shipbuilding rates, bode well.
Within oil and gas, improving global natural gas demand, along with an encouraging outlook for domestic shale oil production as well as China and India’s refining and petrochemical activities, are other growth drivers. In the last reported quarter, segmental net sales totaled $330 million, up 3% year over year, attributed to higher demand across transportation and power generation markets.
Industrial Sales Impacted by China On-Highway Business
The volatile China on-highway natural gas truck market, global macroeconomic weakness and rising costs are concerns for Woodward. Weaker demand for heavy-duty trucks in China led to higher inventory levels among customers in the last reported quarter. This caused a decline in China on-highway orders for the fiscal fourth quarter. Sales of on-highway natural gas trucks in China were $55 million in the fiscal third quarter.
Management expects further decline in the fiscal fourth quarter, with sales in the range of $10 million to $15 million. Owing to lower China on-highway deliveries, management now expects Industrial segment revenues to increase in the band of 11-13% compared with the prior guided range of 13-15%.
WWD’s Estimates
In the past 60 days, analysts have decreased their earnings estimates for the current quarter by 9.8% to $1.20 per share. Though the estimates for the current year have been revised up marginally (up 0.9% to $5.91), the same for the next year have been revised downward by 3.9% to $5.96 per share.
WWD’s Premium Valuation
Woodward stock is trading at a premium with a forward 12-month Price/Earnings of 28.51X compared with the industry’s 20.52X. Though the lofty valuation reflects high expectations for growth, the near-term prospects of the company remain somewhat muddled.
Image Source: Zacks Investment Research
Consequently, it might not be a prudent investment decision to bet on the stock, which carries a Zacks Rank #3 (Hold) at the moment.
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Seagate Technology Holdings plc (STX - Free Report) , American Software, Inc. and ANSYS (ANSS - Free Report) . While Seagate sports a Zacks Rank #1 (Strong Buy), AMSWA and ANSYS 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 STX’s fiscal 2025 EPS is pegged at $7.41, unchanged in the past 30 days. STX’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing in the remaining quarter with the average surprise being 80.9%. The stock has surged 64.3% in the past year.
The Zacks Consensus Estimate for American Software’s 2024 EPS is pegged at 38 cents, unchanged in the past seven days. AMSWA’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while matching in the remaining quarter, with the average surprise being 84.53%. Its shares have declined 5.1% in the past year.
The Zacks Consensus Estimate for ANSS’ 2024 earnings is pegged at $9.96, unchanged in the past 30 days. ANSS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing the mark once, with the average surprise being 4.8%. Its shares have gained 6.5% in the past year.
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Woodward Surges 25% Year to Date: What Lies Ahead for the Stock?
Woodward’s (WWD - Free Report) shares have been performing well on the trading front, with a gain of 24.7% year to date compared with the S&P 500 composite and the sub-industry’s growth of 19.9% and 13.5%, respectively.
The stock closed the last trading session at $169.81, 9.8% below its 52-week high of $188.35, reached on June 3, 2024.
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 18.5%.
YTD Price Performance
Image Source: Zacks Investment Research
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.
WWD Gains From Momentum in Aerospace Segment
Woodward’s performance is being driven by robust end-market demand and price realization, productivity and efficiency improvements. It serves the aerospace and energy markets through two reportable segments: Aerospace and Industrial.
The Aerospace segment benefits from higher commercial OEM and aftermarket sales attributed to improving passenger traffic and aircraft utilization. Defense aftermarket sales rose 22% in the last reported quarter driven by supply-chain stabilization and higher output.
In the third quarter of fiscal 2024, net sales for the segment were $518 million, up 8% year over year. Aerospace comprised 61% of the total revenues in the last reported quarter.
Revenues from the Aerospace business are expected to improve in the upcoming quarters driven by strength in commercial markets as well as higher defense activity.
For fiscal 2024, Aerospace segment revenues are anticipated to increase in the range of 12-14%, unchanged from previous guidance. Despite supply chain disruptions, management remains confident of achieving revenues within the guided range.
WWD’s Industrial Unit Gains From Demand for Power Generation
Nonetheless, solid demand for power generation and continued requirement for backup power in data centers is likely to cushion revenues from the Industrial segment. Higher power demand to support grid stability is another tailwind. Increasing demand for alternative fuels across the marine industry, as well as momentum in the global marine market brought on by higher utilization and rising shipbuilding rates, bode well.
Within oil and gas, improving global natural gas demand, along with an encouraging outlook for domestic shale oil production as well as China and India’s refining and petrochemical activities, are other growth drivers. In the last reported quarter, segmental net sales totaled $330 million, up 3% year over year, attributed to higher demand across transportation and power generation markets.
Industrial Sales Impacted by China On-Highway Business
The volatile China on-highway natural gas truck market, global macroeconomic weakness and rising costs are concerns for Woodward. Weaker demand for heavy-duty trucks in China led to higher inventory levels among customers in the last reported quarter. This caused a decline in China on-highway orders for the fiscal fourth quarter. Sales of on-highway natural gas trucks in China were $55 million in the fiscal third quarter.
Management expects further decline in the fiscal fourth quarter, with sales in the range of $10 million to $15 million. Owing to lower China on-highway deliveries, management now expects Industrial segment revenues to increase in the band of 11-13% compared with the prior guided range of 13-15%.
WWD’s Estimates
In the past 60 days, analysts have decreased their earnings estimates for the current quarter by 9.8% to $1.20 per share. Though the estimates for the current year have been revised up marginally (up 0.9% to $5.91), the same for the next year have been revised downward by 3.9% to $5.96 per share.
WWD’s Premium Valuation
Woodward stock is trading at a premium with a forward 12-month Price/Earnings of 28.51X compared with the industry’s 20.52X. Though the lofty valuation reflects high expectations for growth, the near-term prospects of the company remain somewhat muddled.
Image Source: Zacks Investment Research
Consequently, it might not be a prudent investment decision to bet on the stock, which carries a Zacks Rank #3 (Hold) at the moment.
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Seagate Technology Holdings plc (STX - Free Report) , American Software, Inc. and ANSYS (ANSS - Free Report) . While Seagate sports a Zacks Rank #1 (Strong Buy), AMSWA and ANSYS 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 STX’s fiscal 2025 EPS is pegged at $7.41, unchanged in the past 30 days. STX’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing in the remaining quarter with the average surprise being 80.9%. The stock has surged 64.3% in the past year.
The Zacks Consensus Estimate for American Software’s 2024 EPS is pegged at 38 cents, unchanged in the past seven days. AMSWA’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while matching in the remaining quarter, with the average surprise being 84.53%. Its shares have declined 5.1% in the past year.
The Zacks Consensus Estimate for ANSS’ 2024 earnings is pegged at $9.96, unchanged in the past 30 days. ANSS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing the mark once, with the average surprise being 4.8%. Its shares have gained 6.5% in the past year.