Woodward, Inc. Q1 2026 Financial Summary
Business Context and Reporting Period
This summary covers Woodward, Inc.'s (WWD) Form 10-Q for the quarterly period ended December 31, 2025 (Fiscal Q1 2026). Woodward designs, manufactures, and services energy control products for aerospace and industrial applications. The company operates two reportable segments: Aerospace and Industrial.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Sales | $996.5 million | $772.7 million |
| Net Earnings | $133.7 million | $87.1 million |
| Diluted EPS | $2.17 | $1.42 |
| Gross Margin | 29.3% | 24.5% |
| Operating Cash Flow | $114.4 million | $34.5 million |
| Free Cash Flow | $70.3 million | $0.9 million |
| Total Debt | $888.0 million | $872.5 million (Sep 30, 2025) |
| Cash & Equivalents | $454.2 million | $327.4 million (Sep 30, 2025) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 29.0% year-over-year, driven by higher volumes and price realization across both segments. Aerospace sales rose 28.6% to $634.9 million, while Industrial sales rose 29.7% to $361.6 million.
- Profitability Expansion: Net earnings increased 53.6%. Gross margin improved by 480 basis points to 29.3%, attributed to favorable mix, volume leverage, and pricing.
- Segment Performance:
- Aerospace: Operating profit increased 56.7% to $148.4 million (23.4% margin). Growth was driven by Commercial OEM destocking tapering, increased LEAP/GTF activity, and higher JDAM pricing in Defense.
- Industrial: Operating profit increased 66.7% to $67.0 million (18.5% margin). Growth was driven by volume increases in Power Generation, Transportation, and Oil & Gas.
- Acquisitions: Completed the acquisition of Safran Electronics and Defense Canada and certain U.S./Mexico assets for $40.3 million (net of cash), adding to the Aerospace segment.
- Debt Management: Paid off the entire $75.0 million principal balance of Series I and L Notes in November 2025 using revolver proceeds.
Outlook, Risks, and Unusual Items
- China Wind-Down: On January 12, 2026, the Board approved a plan to wind down on-highway natural gas truck manufacturing operations in China. The company expects pre-tax charges of $20.0 million to $25.0 million, primarily recognized in Q2 and Q3 of fiscal 2026.
- Stock Repurchases: Completed the $600 million 2024 authorization in November 2025. A new $1.8 billion repurchase program was authorized in November 2025, valid through November 2028. The company repurchased $129.4 million of stock in Q1 2026.
- Tax Rate: The effective tax rate increased to 20.9% from 14.5% in the prior year, due to higher earnings relative to stock-based comp benefits, state tax law changes, and the elimination of a U.S. intangible income tax benefit.
- Dividends: Declared a cash dividend of $0.32 per share for the quarter, payable March 5, 2026.
- Risks: Management cites global trade tensions, tariffs, and supply chain disruptions as key risks, though they believe production bases in sales regions mitigate exposure.
Investor Verification Checklist
- Verify the timing and magnitude of the $20-25 million charge related to the China on-highway truck wind-down in upcoming quarters.
- Monitor the remaining $1.71 billion capacity under the new stock repurchase program and execution pace.
- Assess the sustainability of the 29.3% gross margin given inflationary pressures and potential tariff impacts.
- Review the integration progress and revenue contribution from the Safran acquisition in the Aerospace segment.
- Track the effective tax rate volatility due to the one-time reversal of capitalized research costs and state tax changes.