• Net Sales: $773 million, a decrease of 2% year over year.
• Earnings Per Share (EPS): $1.42 compared to $1.46 in the previous year.
• Adjusted Earnings Per Share: $1.35 compared to $1.45 in the previous year.
• Aerospace Segment Sales: $494 million, an increase of 7%.
• Commercial Aftermarket Sales: Up 19%.
• Defense OEM Sales: Up 21%.
• Defense Aftermarket Sales: Up 8%.
• Aerospace Segment Earnings: $95 million or 19.2% of segment sales.
• Industrial Segment Sales: $279 million, a decrease of 15%.
• Transportation Sales: Down 33% due to decline in China on highway sales.
• Core Industrial Sales: Up 7%.
• Industrial Segment Earnings: $40 million or 14.4% of segment sales.
• Research & Development (R&D): $30 million or 3.9% of sales.
• SG&A Expenses: $70 million or 9% of sales.
• Effective Tax Rate: 14.5%.
• Net Cash Provided by Operating Activities: $35 million.
• Capital Expenditures: $34 million.
• Free Cash Flow: $1 million.
• Debt Leverage: 1.5 times EBITDA.
• Shareholder Returns: $50 million returned, including $35 million in share repurchases and $15 million in dividends.
• 2025 Adjusted EPS Guidance: Narrowed to $5.85 to $6.25.

• Warning! GuruFocus has detected 3 Warning Sign with RMBS.

Release Date: February 03, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Woodward Inc (NASDAQ:WWD) reported strong growth in both its aerospace segment and core industrial business, despite a slight overall decline in first-quarter results compared to last year.
• The company successfully managed labor across product lines during a pause in Boeing deliveries, optimizing operations through Kaizen events and workstation rearrangements.
• Woodward Inc (NASDAQ:WWD) is making significant progress in its automation journey, with the commissioning of automated deburring stations at the Rock Cut Campus.
• The acquisition of Safran's Electronics & Defense electromechanical actuation business is expected to strengthen Woodward Inc (NASDAQ:WWD)'s competitive position and expand its technology offerings.
• The company is on track to deliver its 2025 guidance, with a focus on profitable growth, operational excellence, and innovation to create long-term shareholder value.

Negative Points

• First-quarter net sales decreased by 2%, and earnings per share dropped from $1.46 to $1.42, indicating financial challenges.
• Industrial segment sales fell by 15%, primarily due to a significant decline in China on highway sales, which overshadowed core industrial growth.
• The company faces ongoing supply chain challenges post-COVID, with labor shortages and supplier quality issues impacting performance.
• Commercial OEM sales were down 10% due to the Boeing work stoppage, affecting overall aerospace segment performance.
• Free cash flow decreased to $1 million from $5 million in the previous year, reflecting lower earnings and financial constraints.

Q & A Highlights

Q: Can you provide an update on the guidance for the aerospace segment, particularly regarding the growth expectations for defense OEM, commercial OEM aftermarket, and defense aftermarket? A: Charles Blankenship, CEO: We are maintaining a wide range for aerospace sales growth due to ongoing uncertainties with Boeing's performance and supply chain issues. While commercial aftermarket showed strong growth in Q1, it was an easier comparison to last year. We expect defense OEM to be the largest growth driver for this fiscal year, with commercial OEM and aftermarket closely following.

Q: How is the supply chain performing relative to pre-COVID levels, and are there differences between aerospace and industrial segments? A: Charles Blankenship, CEO: The supply chain has not returned to pre-COVID normalcy, with ongoing labor challenges and quality issues. We have invested over $10 million in flexible manufacturing to insource where suppliers struggle. Both aerospace and industrial segments face similar supply chain challenges, with about 15 to 20 suppliers on a highly escalated challenged list.

Q: Is Boeing restarting purchase orders at a low rate, or are they strong from the start? A: Charles Blankenship, CEO: Boeing's demand signal is strong out of the gate. We are responding in a disciplined way to meet this demand, considering existing inventory in the system.

Q: Can you provide more details on the Safran acquisition and its impact on A350 content? Is M&A still a significant part of your strategy? A: Charles Blankenship, CEO: The Safran acquisition enhances our electromechanical actuation capabilities and adds content for the A350. M&A remains a strategic focus for technology and market expansion. We are excited about the opportunities this acquisition brings.

Q: How do you view the long-term demand signals in the power generation market, and what are your capacity plans? A: Charles Blankenship, CEO: We are aligned with our customers' capacity plans and bullish on the power generation market. The demand for gas-fired power generation is driven by grid stability needs and data center growth. We are well-positioned to capitalize on this demand.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.