Release Date: November 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Woodward Inc (WWD, Financial) achieved record annual revenue exceeding $3 billion for the first time, driven by strong performance in both aerospace and industrial segments.
- Aerospace sales increased by approximately 15%, reaching record levels, with margins expanding by 260 basis points.
- The company delivered an all-time high earnings per share and free cash flow increased by more than $100 million compared to the prior year.
- Woodward Inc (WWD) successfully completed the Loves Park transformation, enhancing MRO services infrastructure and testing capabilities.
- The company is well-positioned for anticipated service growth from Leap and GTF engines, with significant content on commercial and defense growth programs.
Negative Points
- Woodward Inc (WWD) faces ongoing supply chain challenges, impacting build rates and creating operational uncertainty.
- The company's direct sales to Boeing have been negatively impacted by a work stoppage, leading to temporary production line shutdowns.
- China on-highway sales declined in the fourth quarter due to local economic challenges, with expectations of continued pressure in 2025.
- Industrial segment earnings decreased in the fourth quarter due to lower China on-highway volume and unfavorable mix.
- The company anticipates compressed margins in defense due to supplier cost increases, with improved margins expected only in late 2025 or early 2026.
Q & A Highlights
Q: Is there any reason why Woodward couldn't provide a PMA offering for the CFM56 7B engine, even though it's not typically a PMA provider?
A: Chip Blankenship, CEO: We are focused on serving the content and customers we have on the Leap and GTF engines. We don't want to be a PMA supplier, and investing in that at this juncture isn't the best use of capital.
Q: How much of the defense OEM growth was driven by JDAMs, and what are the expectations for guided munitions growth in fiscal 2025?
A: Bill Lacey, CFO: JDAMs were a significant part of the growth in Q4, but we also saw growth across other Smart Defense products. We expect continued growth throughout 2025.
Q: Could you confirm if Boeing production has restarted and what rates you're at now?
A: Chip Blankenship, CEO: We have not restarted Boeing production yet. We're waiting for confirmation from Boeing on their anticipated restart rates. Our guidance assumes Boeing will reach previously announced rates by mid-calendar 2025.
Q: What are Woodward's priorities for capital deployment, and is there a target leverage ratio?
A: Bill Lacey, CFO: Our strategy is disciplined and balanced, focusing on high-return projects, offsetting share dilution, and operational excellence. We like to maintain a debt leverage around 1.5 times EBITDA to allow flexibility for M&A activities.
Q: How do you view the aerospace aftermarket growth for fiscal 2025, given the strong growth in 2024?
A: Chip Blankenship, CEO: After strong double-digit growth in recent years, we expect commercial aftermarket growth to level off. We anticipate some volume and price increases, but not at the same rate as previous years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
