Woodward, Inc. 10-Q Summary: Quarter Ended March 31, 2026
Business Context and Reporting Period
This summary covers Woodward, Inc.'s (WWD) Form 10-Q for the quarterly period ended March 31, 2026, and the six months ended on that date. Woodward designs, manufactures, and services energy control products for aerospace and industrial markets. The company operates two reportable segments: Aerospace and Industrial. The filing reflects strong operational performance driven by volume growth and price realization, offset by strategic restructuring charges and increased R&D investments.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Net Sales | $1,090,568 | $883,629 | $2,087,022 | $1,656,354 |
| Gross Margin | 29.0% | 27.2% | 29.1% | 25.9% |
| Net Earnings | $134,013 | $108,949 | $267,732 | $196,040 |
| Diluted EPS | $2.19 | $1.78 | $4.36 | $3.20 |
| Operating Cash Flow (YTD) | $205,264 (vs. $112,341 YTD 2025) | |||
| Free Cash Flow (YTD) | $108,544 (vs. $60,351 YTD 2025) | |||
| Total Debt | $1,123,278 (as of March 31, 2026) | |||
| Cash & Equivalents | $501,169 (as of March 31, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Consolidated net sales increased 23.4% in Q2 2026 and 26.0% YTD compared to the prior year. Growth was driven by higher sales volumes, price realization, and favorable foreign currency impacts.
- Segment Performance:
- Aerospace: Sales rose 25.2% in Q2, driven by increased commercial OEM production rates, strong commercial services (repair volume), and higher defense OEM pricing (JDAM).
- Industrial: Sales rose 20.3% in Q2, driven by volume, price, and currency. Earnings margins improved to 17.0% from 14.3%.
- Restructuring Charges: The company incurred $6.8 million in restructuring charges in Q2 2026 related to the wind-down of its on-highway natural gas truck manufacturing operations in China. No such charges were recorded in the prior year.
- Acquisitions: Woodward acquired Safran Electronics and Defense Canada (closed July 2025) and entered a definitive agreement to acquire Valve Research & Manufacturing (closed April 2026 for ~$121 million).
- Tax Rate: The effective tax rate increased to 20.0% in Q2 2026 from 18.1% in Q2 2025, due to tax reserve remeasurements and the elimination of certain intangible income tax benefits.
Guidance, Outlook, and Risks
- Strategic Investments: Management expects R&D costs to increase in fiscal 2026 and beyond to support next-generation aircraft platforms (Next Generation Single Aisle). Capital expenditures are expected to rise significantly in the second half of 2026 due to a new precision manufacturing facility in Greer, South Carolina.
- China Wind-Down: The company anticipates incurring approximately $13 million in total pre-tax charges related to the China on-highway business wind-down, with the majority expected in Q3 2026.
- Geopolitical Risks: Management is monitoring the impact of U.S.-Iran conflict on oil prices and supply chains, as well as global trade tensions and tariffs. A recent U.S. Supreme Court ruling on IEEPA tariffs has created uncertainty regarding potential tariff recovery processes.
- Dividends: A cash dividend of $0.32 per share was declared for the quarter, payable June 4, 2026.
- Stock Repurchases: The company completed its $600 million 2024 authorization and initiated a new $1.8 billion authorization in November 2025. Approximately $355 million was repurchased in the first six months of 2026.
Investor Verification Checklist
- China Restructuring Costs: Verify the timing and total magnitude of the remaining ~$6.2 million in expected charges for the China wind-down.
- Valve Research Acquisition: Confirm the final purchase price allocation and integration progress for the $121 million acquisition closed in April 2026.
- Tariff Recovery: Monitor the administrative process established by U.S. Customs and Border Protection for recovering tariffs previously paid under IEEPA.
- Capital Expenditures: Track the cash outflow for the new South Carolina facility and its impact on free cash flow in the second half of 2026.
- Commercial Services Volume: Assess the sustainability of the high repair volumes in the Aerospace segment, which are currently supported by legacy aircraft utilization.