Why Is Woodward (WWD) Down 2.2% Since Last Earnings Report?

It has been about a month since the last earnings report for Woodward (WWD). Shares have lost about 2.2% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Woodward due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Woodward, Inc. before we dive into how investors and analysts have reacted as of late.

Woodward's Q2 Earnings Beat Estimates

Woodward reported second-quarter fiscal 2026 adjusted net earnings per share (EPS) of $2.27, which jumped 34.3% year over year and beat the Zacks Consensus Estimate by 13.5%.

Quarterly net sales increased 23.4% year over year to $1090.6 million. The upside was fueled by market tailwinds across Aerospace and Industrial. The top line beat the consensus estimate by 9.9%.

Management highlighted that it is raising its full-year outlook, supported by strong first-half performance and continued demand strength. The company remains focused on disciplined execution in a dynamic environment, while continuing to invest in innovation and operational excellence to drive sustained profitable growth and long-term shareholder value.

WWD’s Segment Results

Aerospace: Net sales were $703 million, up 25% year over year, driven by broad-based strength across commercial services, commercial OEM and defense OEM. Defense OEM and defense services sales were up 9% and 8%, respectively, year over year. Commercial OEM sales were up 30% year over year, while services jumped 36%.

Segmental earnings were $158 million, up from $125 million a year ago. The increase was driven by price realization and higher sales volumes, partially offset by the impact of inflation as well as continued investments in manufacturing capabilities, research and development and the enterprise resource planning system upgrade. Margins expanded 30 basis points (bps) to 22.5%.

Industrial: Net sales totaled $387 million, up 20% year over year, driven by gains across transportation, power generation and oil & gas markets. Core industrial sales, excluding the China on-highway impact, rose 19%.

Transportation sales surged 34%, and oil and gas sales increased 18%. Power generation grew a modest 7%.

Segmental earnings were $66 million, up from $46 million in the year-ago quarter. In the industrial segment, margins increased 270 bps to 17%. The increase was driven by higher sales volumes, effective price realization and a favorable product mix, partially offset by inflationary pressures and a reserve related to a product performance claim.

Other Details

Gross margin was up 180 bps year over year to 29%.

Total costs and expenses were $923.1 million, up 23% year over year.

Adjusted EBITDA was $215.5 million compared with $164 million a year ago.

Cash Flow & Liquidity

As of March 31, 2026, Woodward had $501.2 million in cash and cash equivalents with $453.4 million of long-term debt (less the current portion).

For the quarter ended March 31, 2026, WWD generated $90.8 million of net cash from operating activities compared with $77.8 million reported in the same period last year. For the first half, WWD generated $205.3 million of net cash from operating activities compared with $112.3 million reported a year ago.

For the second quarter, free cash flow was $38.2 million compared with $59.4 million in the year-ago period. This uptick was driven by higher earnings.

Capital expenditures reached $53 million in the second quarter, up from $18 million. The company expects capital spending to rise meaningfully over the remaining two quarters.

In the quarter under review, WWD returned $245 million to its shareholders in the form of $19 million of dividends and $226 million worth of share repurchases.

Fiscal 2026 Guidance

For fiscal 2026, Woodward has raised its overall outlook, reflecting strong performance and improved visibility. The company now expects total sales to grow 20–23%, an increase from the earlier guidance of 14–18%.

At the segment level, Aerospace sales growth is now anticipated at 21–24%, up from the earlier estimated 15–20% range, with segment earnings expected to improve to 23–23.5% of sales compared with 22–23% previously. In the Industrial segment, sales are projected to grow 18–20%, an increase from the prior outlook of 11–14%, while segment earnings are expected to rise to 18–18.5% of sales from the earlier 16–17% range.

The company anticipates adjusted EPS of $9.15–$9.45 versus the prior range of $8.20–$8.60.

Other assumptions remain unchanged — the company still anticipates free cash flow of $300–$350 million, capital expenditures of around $290 million and an adjusted effective tax rate of approximately 22%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a upward trend in estimates revision.

The consensus estimate has shifted 13.82% due to these changes.

VGM Scores

At this time, Woodward has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for value investors.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Woodward has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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