Woodward, Inc. Reports 1.8% Decrease in Net Sales for Q1 Fiscal 2025

Woodward, Inc. reported a decrease in net sales for the first quarter of fiscal year 2025, totaling $772.7 million, down 1.8% from $786.7 million in the same period last year. The decline was primarily driven by lower volumes in the Industrial segment, which saw sales drop to $278.8 million from $326.0 million, a decrease of 14.5%. In contrast, the Aerospace segment experienced a 7.2% increase in sales, reaching $493.9 million, attributed to price realization despite facing inflationary pressures and lower volumes. The company's net earnings for the quarter were $87.1 million, down from $90.0 million a year earlier, resulting in diluted earnings per share of $1.42 compared to $1.46 in the prior year.

The company's financial performance reflected a mixed operational landscape. While total costs and expenses decreased slightly to $670.9 million from $677.0 million, the cost of goods sold remained stable at $583.1 million, representing 75.5% of net sales. Selling, general, and administrative expenses also saw a reduction, falling to $69.7 million from $74.5 million, which contributed to a slight improvement in the gross margin to 24.5% from 26.0%. However, interest expenses increased to $12.3 million, reflecting higher average borrowings.

Strategically, Woodward announced significant developments, including the planned acquisition of Safran Electronics & Defense's electromechanical actuation business, which is expected to enhance its capabilities in aircraft stabilization systems. Additionally, the company is in the process of divesting its Industrial heavy-duty gas turbine combustion parts product line to GE Vernova, which is anticipated to close later in fiscal year 2025. These moves are part of Woodward's ongoing efforts to streamline operations and focus on high-growth areas.

Operationally, Woodward's customer base and market engagement metrics showed variability. The Aerospace segment's earnings increased to $94.7 million, with a margin of 19.2%, while the Industrial segment's earnings fell to $40.2 million, with a margin of 14.4%. The company reported a decrease in cash provided by operating activities to $34.5 million from $46.8 million, primarily due to timing in cash payments and increased working capital needs. As of December 31, 2024, Woodward held $283.7 million in cash and cash equivalents, with total outstanding debt of $902.2 million.

Looking ahead, Woodward anticipates challenges in its on-highway natural gas truck business in China due to economic conditions, which may impact future demand. The company remains focused on leveraging its strategic acquisitions and divestitures to enhance operational efficiency and drive growth. Management expressed confidence in the company's ability to generate sufficient cash flow to meet its operational needs and support future investments, despite the current economic uncertainties.