Press release·03/03/2025 00:57:30

Financial Overview of Woodward, Inc. for Q1 2025

Woodward, Inc., a leading provider of aerospace and industrial control systems, has released its financial results for the first quarter of fiscal year 2025. The report highlights the company’s operational and financial performance, as well as its outlook for the future.

Operational Highlights

In the first quarter of fiscal year 2025, Woodward’s consolidated net sales decreased by 1.8% to $772.7 million, compared to $786.7 million in the same period of the prior year. This decline was driven by lower sales volumes in both the Aerospace and Industrial segments, partially offset by price increases.

The Aerospace segment saw a 7.2% increase in net sales to $493.9 million, primarily due to price realization, though this was partially offset by inflation, unfavorable product mix, and lower volumes. Commercial OEM sales decreased due to the impact of the Boeing work stoppage, while commercial aftermarket sales increased due to high aircraft utilization rates. Defense OEM and defense aftermarket sales also increased, driven by higher demand for smart defense and fixed-wing aircraft.

In contrast, the Industrial segment experienced a 14.5% decrease in net sales to $278.8 million. This was mainly attributable to lower volumes and unfavorable product mix, partially offset by price increases and favorable foreign currency exchange rates. The company noted a substantial sales decline in its on-highway natural gas truck business in China due to the deteriorating local economy.

Profitability and Earnings

Woodward’s consolidated net earnings for the first quarter of fiscal year 2025 were $87.1 million, or $1.42 per diluted share, compared to $90.0 million, or $1.46 per diluted share, in the same period of the prior year. The decrease in net earnings was primarily due to lower sales volumes, partially offset by price realization and operational improvements.

Adjusted net earnings, which exclude certain one-time items, were $82.6 million, or $1.35 per diluted share, compared to $89.8 million, or $1.45 per diluted share, in the prior year period. The adjusted effective tax rate for the quarter was 14.0%, down from 17.7% in the same period of the prior year.

Earnings before interest and taxes (EBIT) were $112.8 million, compared to $119.7 million in the first quarter of fiscal year 2024. Adjusted EBIT, which excludes the impact of certain one-time items, was $107.0 million, compared to $119.1 million in the prior year period.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) were $140.7 million, compared to $148.5 million in the first quarter of fiscal year 2024. Adjusted EBITDA, which excludes the impact of certain one-time items, was $134.9 million, compared to $147.9 million in the prior year period.

Liquidity and Capital Resources

Woodward’s liquidity position remains strong, with $283.7 million in cash and cash equivalents and $734.1 million in available borrowing capacity under its revolving credit facility as of December 31, 2024. The company’s total outstanding debt stood at $902.2 million.

Net cash provided by operating activities for the first three months of fiscal year 2025 was $34.5 million, compared to $46.8 million in the same period of the prior year. The decrease was primarily due to the timing of certain cash payments for accounts payable, partially offset by timing of cash received from customers and increases in working capital.

Free cash flow, defined as net cash flow provided by operating activities less payments for property, plant, and equipment, was $0.9 million in the first three months of fiscal year 2025, compared to $5.0 million in the same period of the prior year. The decrease in free cash flow was primarily attributable to lower earnings, partially offset by lower capital expenditures.

Segment Performance

Aerospace Segment The Aerospace segment’s net sales increased by 7.2% to $493.9 million in the first quarter of fiscal year 2025, compared to $460.8 million in the same period of the prior year. This increase was primarily due to price realization, partially offset by inflation, unfavorable product mix, and lower volumes.

Aerospace segment earnings increased by 19.9% to $94.7 million, or 19.2% of segment net sales, compared to $79.0 million, or 17.2% of segment net sales, in the first quarter of fiscal year 2024. The increase in segment earnings was driven by price realization, partially offset by lower sales volumes and other factors.

Industrial Segment The Industrial segment’s net sales decreased by 14.5% to $278.8 million in the first quarter of fiscal year 2025, compared to $326.0 million in the same period of the prior year. This decline was primarily attributable to lower volumes and unfavorable product mix, partially offset by price increases and favorable foreign currency exchange rates.

Industrial segment earnings decreased by 39.9% to $40.2 million, or 14.4% of segment net sales, compared to $66.9 million, or 20.5% of segment net sales, in the first quarter of fiscal year 2024. The decrease in segment earnings was primarily due to the substantial sales decline in the company’s on-highway natural gas truck business in China, partially offset by price realization, volume increases in other areas, and operational improvements.

Outlook and Future Considerations

Woodward expects significant sales and earnings decreases in its China on-highway natural gas truck business in fiscal year 2025 due to the deteriorating local Chinese economy. Future demand for this business remains uncertain due to the volatility of the market.

The company also noted that it anticipates ongoing variability in research and development costs due to the timing of customer business needs on current and future programs.

Woodward’s ability to manage risks from operating internationally, as well as its ability to attract, retain, and develop qualified personnel and maintain favorable labor relations, will be critical factors in its future performance.

Additionally, the company’s ability to mitigate the ongoing impacts of inflation and protect its intellectual property will be important considerations going forward.

Conclusion

Woodward’s financial results for the first quarter of fiscal year 2025 reflect a mixed performance, with the Aerospace segment showing growth and the Industrial segment experiencing a significant decline, primarily due to the challenges in the China on-highway natural gas truck business.

The company’s strong liquidity position and continued focus on operational improvements provide a solid foundation for navigating the current market conditions. However, the uncertainty surrounding the future demand in the China on-highway natural gas truck business and the broader economic environment will be key factors to monitor in the coming quarters.

Woodward’s management remains committed to driving long-term value for its shareholders through strategic initiatives, cost management, and a focus on innovation and customer satisfaction.