Woodward, Inc.

Woodward, Inc. is an independent designer, manufacturer, and services provider of control solutions for the aerospace and industrial markets. The company serves two reportable segments: Aerospace and Industrial. Within the aerospace market, Woodward provides systems, components, and solutions for both commercial and defense applications, including propulsion and combustion control solutions for turbine powered aircraft and fluid and motion control solutions for critical aerospace and defense applications. Within the industrial market, key focus areas are applications and control solutions for machines that produce electricity utilizing conventional or alternative energy sources and fluid, motion, and combustion control solutions for complex oil and gas, industrial, power generation, and transportation applications.

Woodward competes with numerous companies around the world. In Aerospace, competitors include divisions of Eaton, Honeywell, Moog, Parker Hannifin, and RTX Corporation. In Industrial, competitors include Emerson, EControls, Heinzmann GmbH & Co., Hoerbiger, Meggitt, Robert Bosch AG, and Triconix. Woodward believes new competitors face significant barriers to entry into many of its markets, including various government mandated certification requirements. The company believes it is a market leader in providing customers with advanced technology and superior product performance at a competitive price.

Woodward generates revenue primarily through sales to original equipment manufacturers (OEMs) and equipment packagers, as well as through repair, maintenance, replacement, and other services support for its installed products. Revenues from the Aerospace segment are generated by sales to OEMs, tier-one suppliers, prime contractors, and through services sales of components. Revenues from the Industrial segment are generated primarily by sales to OEMs for both new unit production and providing other related services, and also through an independent network of distributors and authorized system integrators, repairs and overhaul facilities, and directly to end users.

The Aerospace segment designs, manufactures, and services systems and products for the management of fuel, air, combustion, and motion control. These products include fuel pumps, metering units, actuators, air valves, specialty valves, fuel nozzles, and thrust reverser actuation systems for turbine engines and nacelles, as well as flight deck controls, actuators, servocontrols, motors, and sensors for aircraft. These products are used on commercial and private aircraft and rotorcraft, as well as on military fixed-wing aircraft and rotorcraft, guided weapons, and other defense systems. Aerospace segment net sales for fiscal year 2025 were $2,312,806 ¹, compared to $2,028,618 ² in fiscal year 2024. Aerospace segment earnings for fiscal year 2025 were $506,613 ³, compared to $385,360 ⁴ in fiscal year 2024. Segment earnings as a percent of segment net sales were 21.9% ⁵ for fiscal year 2025 and 19.0% ⁶ for fiscal year 2024.

The Industrial segment designs, produces, and services systems and products for the management of energy in the form of fuel, air, fluids, gases, motion, combustion, and electricity. These products include actuators, valves, pumps, fuel injection systems, solenoids, ignition systems, control systems, electronics and software, and sensors. The equipment on which these products are found is used to generate power; to extract, distribute, and refine energy sources; to mine other commodities; and to convert fuel to work in transportation and freight, mobile, and industrial equipment applications. Industrial segment net sales for fiscal year 2025 were $1,254,258 ⁷, compared to $1,295,631 ⁸ in fiscal year 2024. Industrial segment earnings for fiscal year 2025 were $182,524 ⁹, compared to $229,857 ¹⁰ in fiscal year 2024. Segment earnings as a percent of segment net sales were 14.6% ¹¹ for fiscal year 2025 and 17.7% ¹² for fiscal year 2024.

During fiscal year 2025, Woodward announced the acquisition of Safran's electromechanical actuation business, which includes the A350 Trimmable Horizontal Stabilizer Actuator product. On September 16, 2025, Woodward announced plans to build a precision manufacturing facility in Greer, South Carolina, in Spartanburg County, which is expected to become operational in 2027. On November 17, 2025, Woodward paid the entire principal balance of $75,000 ¹³ on the Series I and L Notes using proceeds from borrowings under its existing revolving credit facility. During fiscal year 2025, Woodward made $172,857 ¹⁴ of cash repurchases of common stock. In January 2024, the Board authorized a program for the repurchase of up to $600,000 ¹⁵ of Woodward's outstanding shares of common stock over a three-year period ending in January 2027.

Consolidated net sales for fiscal year 2025 increased by $242,815 ¹⁶, or 7.3% ¹⁷, to $3,567,064 ¹⁸ compared to $3,324,249 ¹⁹ in fiscal year 2024. Consolidated net earnings for fiscal year 2025 were $442,111 ²⁰, compared to $372,971 ²¹ in fiscal year 2024. Diluted earnings per share for fiscal year 2025 were $7.19 ²², compared to $6.01 ²³ in fiscal year 2024. Net cash provided by operating activities for fiscal year 2025 was $471,294 ²⁴, compared to $439,089 ²⁵ for fiscal year 2024. Free cash flow for fiscal year 2025 was $340,366 ²⁶, compared to $342,809 ²⁷ for fiscal year 2024.

In the Aerospace segment, Woodward expects production levels to continue to grow due to strong OEM order backlogs for new aircraft models and continued demand supply imbalance. The company expects narrowbody deliveries to improve due to backlog associated with single aisle programs and planned production ramps in fiscal year 2026 as compared to fiscal year 2025. Woodward also expects an increase in OEM and initial provisioning sales for the 737 MAX and CFM LEAP engines in the coming months. In defense, Woodward expects overall demand to increase in the near term for smart defense programs. The company recently announced that Airbus has selected Woodward as the supplier for the electro-hydraulic A350 Spoiler Actuation System, which includes the supply of actuation systems for 12 of the 14 aircraft spoilers on the A350, as well as maintenance and repair services. Additionally, Woodward announced the acquisition of Safran's electromechanical actuation business, which brings the A350 Trimmable Horizontal Stabilizer Actuator product, strengthening Woodward's position for future product wins.

In the Industrial segment, Woodward expects continued increased demand in power generation in fiscal year 2026, driven in part by rising data center requirements, global electrification, renewable integration, and expanding data center loads. In the transportation market, Woodward experienced a material decline in demand for its on-highway natural gas truck business in China in fiscal year 2025 compared to fiscal year 2024, and future demand remains uncertain due to the volatility of this business. In global marine markets, demand in fiscal year 2025 increased due to sustained ship build rates and the favorable mix of ships produced, and both commercial and defense marine customers continue to launch additional projects. In oil and gas, Woodward expects market conditions to stabilize in fiscal year 2026, with early signs of increased demand for traditional oil and gas applications across both reciprocating engines and gas turbine solutions.

Gross margin was 26.8% ²⁸ for fiscal year 2025, compared to 26.4% ²⁹ for fiscal year 2024. Cost of goods sold as a percentage of net sales declined slightly to 73.2% ³⁰ for fiscal year 2025, compared to 73.6% ³¹ for fiscal year 2024. Selling, general and administrative expenses as a percentage of net sales were 9.2% ³² for fiscal year 2025 and 9.3% ³³ for fiscal year 2024. Research and development costs as a percentage of net sales declined slightly to 4.1% ³⁴ for fiscal year 2025, as compared to 4.2% ³⁵ for fiscal year 2024.

Woodward expects increased cost pressure resulting from already announced tariffs, but the company's production and supply bases are largely in the same regions where its products are sold, which it believes will mitigate its exposure. Woodward is closely tracking costs from its supply base and customer forecasts regarding the potential impact of currently announced tariff levels, changes to such levels, and actual and potential retaliatory trade actions. The company has experienced and is expecting minimal levels of cost pressure as a result of the implemented tariffs and is proactively working to mitigate this cost pressure, potential sales risks, and potential supply chain disruptions. On September 16, 2025, Woodward announced plans to build a precision manufacturing facility in Greer, South Carolina, which is a strategic investment that will require significant capital investment in the upcoming fiscal years and is expected to become operational in 2027.

Research and development costs for fiscal year 2025 were $147,568 ³⁶, compared to $140,676 ³⁷ for fiscal year 2024. Payments for property, plant, and equipment for fiscal year 2025 were $130,928 ³⁸, compared to $96,280 ³⁹ for fiscal year 2024. In January 2024, the Board authorized a program for the repurchase of up to $600,000 ⁴⁰ of Woodward's outstanding shares of common stock over a three-year period ending in January 2027. During fiscal year 2025, Woodward made $172,857 ⁴¹ of cash repurchases of common stock. While Woodward has historically paid dividends to holders of its common shares on a quarterly basis, the declaration and payment of future dividends will depend on many factors and are at the discretion of the board of directors.

In the Aerospace segment, commercial OEM sales decreased in fiscal year 2025 as compared to fiscal year 2024, primarily due to the Boeing work stoppage earlier in the year and inventory normalization by airframers that occurred in the second half of the year. Woodward experienced a material decline in demand for its on-highway natural gas truck business in China in fiscal year 2025 compared to fiscal year 2024, due to the deteriorating Chinese economy, a narrower natural gas to diesel price spread, and elevated customer inventory levels; future demand remains uncertain due to the volatility of this business. Woodward also continues to monitor the evolving trade policy between the U.S. and China.

Woodward faces risks from operating internationally, including the impacts of tariffs on its markets and supply chain. The company is subject to risks associated with doing business internationally, including transportation delays, political and economic conditions, the imposition of taxes, import and export controls, duties and tariffs, embargoes, sanctions and other trade restrictions, and fluctuations in currency exchange rates. The United States and other countries have levied tariffs and taxes on certain goods, including during fiscal year 2025, and some of Woodward's products and manufacturing inputs are included in these tariffs. Future tariffs could increase the company's cost of materials, which could pressure its profitability if it is unable to secure commensurate price increases from its customers.

A significant portion of Woodward's revenue is concentrated among a relatively small number of customers, with sales to the largest five customers representing approximately 36% ⁴² of consolidated net sales for fiscal year 2025 and approximately 34% ⁴³ of accounts receivable. If any of these significant customers were to change suppliers, in-source production, or experience financial distress, net sales could decrease significantly. Sales made directly or indirectly to U.S. Government agencies and entities represented 20% ⁴⁴ of total sales in fiscal year 2025 and 17% ⁴⁵ in fiscal year 2024, exposing the company to risks unique to government contracting, including modification, curtailment, or termination of contracts, and compliance with procurement laws and regulations. Woodward's strategic joint venture with GE Aerospace may make it more difficult to secure long-term sales in certain aerospace markets, as consolidation in the aircraft engine market is increasingly prevalent, resulting in fewer engine manufacturers. The company faces risks from operating internationally, with approximately 46% ⁴⁶ of total sales in fiscal year 2025 made to customers in jurisdictions outside the United States, exposing it to tariffs, trade restrictions, and currency fluctuations. Woodward has $832,288 ⁴⁷ of goodwill, representing approximately 18% ⁴⁸ of total assets, and future impairment charges could occur if estimates of fair values decrease.

Management's message emphasizes that Woodward enhances the global quality of life and sustainability by optimizing energy use through improved efficiency and lower emissions. The company has developed and is executing on strategies to leverage the macro trends of reducing greenhouse gases, commercializing space, and accelerating the digital age. Management highlights that Woodward is partnering with customers to enable their equipment to be more efficient, capable of utilizing clean burning fuels, advancing fuel cells, and the integration of renewable power in both commercial and defense operations. The strategic priorities emphasized include providing energy control and optimization solutions for the aerospace and industrial markets, leveraging core technologies across markets and customer applications, and focusing on serving OEMs and equipment packagers while also providing service support for installed products.