Woodward Inc (WWD) Q3 2025 Earnings Call Highlights: Record Sales and Strategic Aerospace Advances

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Revenue: Record net sales of $915 million, an increase of 18% year-over-year.
Earnings Per Share (EPS): $1.76, up from $1.63 year-over-year.
Aerospace Segment Sales: $596 million, a 15% increase year-over-year.
Aerospace Margins: Expanded 140 basis points to 21.1%.
Industrial Segment Sales: $319 million, a decrease of 3% year-over-year.
Core Industrial Sales Growth: Excluding China on-highway and combustion, grew by 9%.
Industrial Margins: Core Industrial margins expanded to 15.6% of sales, up 90 basis points.
Free Cash Flow: $159 million for the first nine months, down from $225 million year-over-year.
Debt Leverage: 1.5 times EBITDA as of June 30, 2025.
Shareholder Returns: $172 million returned in the first nine months, including $124 million in share repurchases and $48 million in dividends.
2025 Sales Guidance: Revised to $3.45 billion to $3.525 billion.
2025 Adjusted EPS Guidance: Revised to $6.50 to $6.75.
2025 Free Cash Flow Guidance: Revised to $315 million to $350 million.
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Release Date: July 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Woodward Inc (NASDAQ:WWD) reported record sales for the third quarter of 2025, with an 8% year-over-year increase.
Aerospace segment sales reached a record $596 million, marking a 15% increase, driven by strong defense OEM sales and commercial services.
The company secured a significant contract with Airbus to provide spoiler control actuators for the A350, enhancing its position in the aerospace market.
Woodward Inc (NASDAQ:WWD) completed the acquisition of Safran's North American electromechanical actuation business, strengthening its capabilities in the aerospace sector.
The company raised its full-year sales and earnings guidance based on strong year-to-date performance and a stable macro environment.
Negative Points
Industrial segment sales declined by 3%, primarily due to a significant drop in China on-highway sales.
Free cash flow decreased to $159 million for the first nine months of 2025, down from $225 million, due to increased working capital.
The company anticipates increased capital expenditures in 2026 and 2027 to support growth initiatives, which may impact free cash flow.
Aerospace margins were impacted by an unfavorable mix due to growth in lower-margin defense OEM products.
Supply chain challenges continue to affect aircraft deliveries, impacting the commercial OEM sales performance.
Q & A Highlights
Q: Chip, I thought I heard you say that LEAP and GTF aftermarket volumes are now close to legacy volumes. Could you clarify? A: Charles Blankenship, CEO: Yes, LEAP and GTF volumes are now in the same neighborhood as legacy volumes, though still short of the total. We forecast the crossover around 2028. The growth in LEAP and GTF is having a meaningful impact on our commercial Aero services revenue and margin.
Q: Bill, can you explain the sequential margin decline in Aerospace in the third quarter and the expected improvement in the fourth quarter? A: William Lacey, CFO: The decline was due to strong growth in defense OE, which has lower profit margins, causing an unfavorable mix. For the fourth quarter, we expect incrementals to return to first-half levels, driven by smart defense program pricing and strong commercial aftermarket business.
Q: Can you elaborate on the investments impacting the third quarter margin and the free cash flow reduction? A: William Lacey, CFO: Investments were made to drive productivity, including team leaders, operations supervisors, and manufacturing engineers. The free cash flow reduction is due to increased inventory to meet customer demands and improve supply chain visibility.
Q: Regarding the A350 spoiler win, is this a broader play for future actuation wins on next-gen narrow-body aircraft? A: Charles Blankenship, CEO: The A350 spoiler actuator business is substantial, with 12 actuators per aircraft. The investment is significant but manageable, and we see it as a strategic move to position ourselves for future opportunities.
Q: How do you view the growth in power generation over the coming years relative to OEMs like GE Vernova and Rolls-Royce? A: Charles Blankenship, CEO: We see similar growth to OEMs, but it can vary based on which platforms win applications. Our products are on various gas turbines and reciprocating engines, so our growth aligns with OEM forecasts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.