Why Is Woodward (WWD) Down 8.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Woodward (WWD). Shares have lost about 8.8% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Woodward due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts. Woodward’s Q4 Earnings Beat EstimatesWoodward reported fourth-quarter fiscal 2024 adjusted net earnings per share (EPS) of $1.41, up 6% year over year and beating the Zacks Consensus Estimate by 15.6%.Quarterly net sales increased 10% year over year to $855 million. Strong operational execution, along with continued momentum in end-market demand, led to this uptick. The top line beat the consensus estimate by 5.9%.For the full year, the company reported net sales of $3.3 billion, increasing 14% year over year and adjusted EPS surged 45% to $6.11.Segment ResultsAerospace: Net sales were $553 million, up 22% year over year driven by broad-based strength. Defense OEM and defense aftermarket sales were up 40% and 7%, respectively, year over year.  Commercial OEM sales were up 16% due to robust demand amid supply-chain challenges. Commercial aftermarket sales increased 22% attributed to strong passenger traffic and higher aircraft utilization. We predicted the metric to be $511 million.Segmental earnings were $106 million, up from $78 million a year ago. The increase in segment earnings was a result of price realization and strong volume growth partly offset by inflation.Industrial: Net sales totaled $302 million, down 6% year over year. A 19% decline in transportation sales offset revenue growth from power generation (up 4%) and oil and gas (up 12%). We expected the metric to be $295.3 million. The transportation segment was extensively affected by weakness in China’s on-highway natural gas trucks business. The business was impacted by low levels of production stemming from local economic troubles. Revenues were $22 million in the quarter under review. However, management expects further decline in the fiscal first quarter, with sales to be around $5 million.Segmental earnings were $38 million, down from $54 million in the year-ago quarter. Industrial earnings were affected by lower volume and an unfavorable mix, which was partly offset by price realization.Other DetailsGross margin was down 10 basis points year over year to 24.3%.Total costs and expenses were $752.9 million, up 11% year over year. Adjusted EBITDA was $147 million compared with $139 million a year ago.Cash Flow & LiquidityAs of Sept. 30, 2024, Woodward had $282.3 million in cash and cash equivalents with $569.8 million of long-term debt (less the current portion).For the fiscal year ended Sept. 30, 2024, the generated $439 million of net cash from operating activities, increasing from $309 million reported in the prior-year period.Adjusted free cash flow was $348 million compared with $238 million in fiscal 2024. This rise in adjusted free cash flow was primarily due to increased earnings and improved working capital, partially offset by higher capital expenditures.During fiscal 2024, the company returned $449 million to its shareholders in the form of $58 million of dividends and $391 million of share repurchases. In the fourth quarter, it paid $15 million in dividends and $86 million toward share repurchases.GuidanceDriven by a strong demand environment and improving operational execution, it expects fiscal 2025 sales to be between $3.3 billion and $3.5 billion. Aerospace segment revenues are anticipated to increase in the range of 6-13%.Management expects revenues from China on-highway natural gas trucks to be $40 million for the year, indicating a significant decline of $175 million from fiscal 2024. As a result, Industrial segment revenues are expected to decline in the band of 7-11%.Adjusted free cash flow is anticipated to be between $350 million and $400 million while EPS is expected to be between $5.75 and $6.25.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in estimates revision.The consensus estimate has shifted -8.57% due to these changes.VGM ScoresCurrently, Woodward has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Woodward has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Woodward, Inc. 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