Why Woodward Rallied Today

Shares of aircraft and industrial parts supplier Woodward (NASDAQ: WWD) were taking off today, up as much as 12.5% before settling into a 6.8% gain as of 2 p.m. ET.

Woodward made news after reporting its fiscal fourth-quarter earnings last night, which came in handily above expectations. Furthermore, the company guided for fiscal 2025 results that exceeded analyst estimates as well.

Riding the friendly skies to a beat

Woodward produces a diverse portfolio of products for aerospace and industrial gas markets, including actuators, fuel pumps, metering units, various kinds of valves and nozzles, and other equipment.

For its fiscal fourth quarter. Woodward grew revenue 10% to $855 million, with adjusted non-GAAP (generally accepted accounting principles) earnings per share up 6% to $1.41. Both figures handily beat analyst expectations.

Results were bolstered by strong demand in aerospace, where sales were up a whopping 22% relative to the prior year, with aerospace earnings up 35% on two percentage points of margin expansion. Management noted strong demand for aftermarket parts, as commercial aircraft are currently at high utilization, due to supply constraints for new aircraft in the market.

On the other hand, the company's industrial segment actually declined 6%, with heavy-duty truck engine parts declining in China due to the economic challenges there. Additionally, for the full year, the company's oil and gas revenue declined slightly due to lower commodity prices.

2025 looks better than expected

For 2025, management guided for $3.4 billion in revenue and $6 at the midpoint, relative to the $3.3 billion and $6.11 in adjusted EPS earned in fiscal 2024. While that would only mark 2.3% revenue growth and actually a slight decline in adjusted profits, that was actually ahead of Wall Street's current 2025 estimates for $3.39 billion and $5.86.

The muted results for next year may be due to a broader industrial slowdown that's already well known, while the industrial on-highway gas engines for China is supposed to deduct $1.15 from next year's earnings guide. So investors appear to be honing in on the core aerospace segment, which makes up a majority of sales, and is projected to grow revenue another 9.7% in 2025, even on top of the strong 2024 numbers.

Yet while today's gains were a nice bit of news for Woodward investors and its aerospace segment appears quite strong, the stock now looks pricey at over 30 times next year's earnings guidance.

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Billy Duberstein and/or his clients has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.