• Net Sales: $884 million, an increase of 6% year-over-year.
• Adjusted Earnings Per Share (EPS): $1.69, up from $1.62.
• Net Cash Provided by Operating Activities: $112 million for the first half of 2025, down from $144 million.
• Free Cash Flow: $60 million for the first half of 2025, compared to $88 million.
• Debt Leverage: 1.5x EBITDA as of March 31, 2025.
• Capital Returned to Stockholders: $111 million in the first half of 2025, including $79 million in share repurchases and $31 million in dividends.
• Aerospace Segment Sales: $562 million, an increase of 13%.
• Defense OEM Sales: Up 52% in the quarter.
• Commercial Aftermarket Sales: Up 23% in the quarter.
• Commercial OEM Sales: Down 9% due to production ramp issues.
• Aerospace Segment Earnings: $125 million, with margins expanding 240 basis points to 22.2%.
• Industrial Segment Sales: $322 million, a decrease of 5%.
• China On-Highway Sales: $20 million, a $45 million decrease from the prior year.
• Core Industrial Sales: Up 11%, with oil and gas up 21%, transportation up 13%, and power generation up 40%.
• Industrial Segment Earnings: $46 million, with margins at 14.3%.
• 2025 Guidance: Consolidated sales expected between $3.375 billion and $3.5 billion; adjusted EPS between $5.85 and $6.25.

• Warning! GuruFocus has detected 2 Warning Sign with BKU.

Release Date: April 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 a 6% year-over-year increase in net sales for the second quarter of fiscal year 2025.
• Adjusted earnings per share rose by 4%, indicating steady growth despite challenges in the China on-highway market.
• The aerospace segment achieved record sales, with a 13% increase driven by strong defense OEM sales and commercial aftermarket growth.
• The company successfully delivered the first production Micronet XP advanced gas turbine control system for the US Navy, marking a significant milestone.
• Woodward Inc (NASDAQ:WWD) raised the low end of its sales and adjusted EPS guidance for fiscal year 2025, reflecting strong year-to-date performance.

Negative Points

• Industrial segment sales decreased by 5%, primarily due to a significant decline in China on-highway sales.
• Free cash flow for the first half of 2025 was $60 million, down from $88 million in the previous year, mainly due to increased working capital.
• Commercial OEM sales were down 9% due to a measured production ramp following the Boeing work stoppage.
• The company faces potential risks from tariffs and trade tensions, which could impact operations and sales.
• Defense aftermarket sales decreased by 8%, and the company anticipates a slower growth rate in commercial services in the second half of the year.

Q & A Highlights

Q: Can you further decompose the commercial aftermarket growth in the quarter in terms of platforms or customer geographies? A: The growth was broad-based, with a notable increase in spare parts orders from MRO facilities. This was not primarily driven by China, which is currently showing slower activity.

Q: How far does the backlog run in marine transportation, and what is your visibility in that market if global shipping activity reduces? A: The order backlog for marine transportation extends into 2029. However, extended trade tensions between the US and China could impact fleet utilization and aftermarket demand.

Q: Given the volatility in the China on-highway natural gas truck market, does it make sense to find a different owner for that product line? A: We continuously evaluate our portfolio for strategic alignment. Currently, we are focused on serving our customers with the best technology and managing through the downturn efficiently.

Q: What drives the Aerospace segment margin in the second half, given the unchanged guidance despite strong first-half performance? A: We expect defense OEM to be a larger share of volume, moderating incrementals. Additionally, potential tariff impacts have been considered, maintaining our margin guidance.

Q: Can you provide an update on the JDAM program and the impact of higher pricing from new contracts? A: JDAM demand remains strong, and we expect to transition to higher-priced lots by Q4, assuming current supply chain conditions continue.

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