Yahoo Finance Woodward (NASDAQ:WWD) Misses Q2 Sales Targets
Aerospace and defense company Woodward (NASDAQ:WWD) fell short of analysts' expectations in Q2 CY2024, with revenue up 5.9% year on year to $847.7 million. The company's full-year revenue guidance of $3.28 billion at the midpoint also came in 1% below analysts' estimates. It made a GAAP profit of $1.63 per share, improving from its profit of $1.37 per share in the same quarter last year.
Is now the time to buy Woodward? Find out in our full research report.
Woodward (WWD) Q2 CY2024 Highlights:
Revenue: $847.7 million vs analyst estimates of $853.1 million (small miss)
EPS: $1.63 vs analyst estimates of $1.51 (8.2% beat)
The company dropped its revenue guidance for the full year from $3.3 billion to $3.28 billion at the midpoint, a 0.8% decrease
Gross Margin (GAAP): 27.1%, up from 25.5% in the same quarter last year
Free Cash Flow of $137.3 million, up 65.8% from the previous quarter
Market Capitalization: $11.16 billion
"We delivered a solid quarter, driven by robust end-market demand and the dedicated efforts of all our members,” stated Chip Blankenship, Chairman and Chief Executive Officer.
Initially designing controls for water wheels in the early 1900s, Woodward (NASDAQ:WWD) designs, services, and manufactures energy control products and optimization solutions.
Aerospace
Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Unfortunately, Woodward's 2.4% annualized revenue growth over the last five years was weak. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Woodward's annualized revenue growth of 18.5% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
This quarter, Woodward's revenue grew 5.9% year on year to $847.7 million, missing Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 6.1% over the next 12 months.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Woodward has managed its expenses well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10.6%.
Looking at the trend in its profitability, Woodward's annual operating margin rose by 3 percentage points over the last five years, showing its efficiency has improved.
This quarter, Woodward generated an operating profit margin of 15.6%, up 2.5 percentage points year on year. This increase was a welcome development and shows it was recently more efficient because its expenses grew slower than its revenue.
EPS
Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Woodward's EPS grew at an unimpressive 7.6% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 2.4% annualized revenue growth and tells us the company became more profitable as it expanded.
Diving into the nuances of Woodward's earnings can give us a better understanding of its performance. As we mentioned earlier, Woodward's operating margin expanded by 3 percentage points over the last five years. On top of that, its share count shrank by 3.3%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Woodward, its two-year annual EPS growth of 51.6% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
In Q2, Woodward reported EPS at $1.63, up from $1.37 in the same quarter last year. This print beat analysts' estimates by 8.2%. Over the next 12 months, Wall Street expects Woodward to grow its earnings. Analysts are projecting its EPS of $5.98 in the last year to climb by 2% to $6.10.
Key Takeaways from Woodward's Q2 Results
It was good to see Woodward beat analysts' EPS expectations this quarter. On the other hand, its revenue fell short of Wall Street's estimates. The company also cut its full year revenue guidance. Overall, this was a bad quarter for Woodward. The stock traded down 4.5% to $175 immediately after reporting.
Woodward may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
