Aerospace and defense company Woodward (NASDAQ:WWD) reported Q1 CY2025 results topping the market’s revenue expectations , with sales up 5.8% year on year to $883.6 million. The company’s full-year revenue guidance of $3.44 billion at the midpoint came in 1% above analysts’ estimates. Its non-GAAP profit of $1.69 per share was 15.1% above analysts’ consensus estimates.
Revenue: $883.6 million vs analyst estimates of $835.6 million (5.8% year-on-year growth, 5.7% beat)
Adjusted EPS: $1.69 vs analyst estimates of $1.46 (15.1% beat)
Adjusted EBITDA: $164 million vs analyst estimates of $154.3 million (18.6% margin, 6.3% beat)
The company lifted its revenue guidance for the full year to $3.44 billion at the midpoint from $3.4 billion, a 1.1% increase
Management slightly raised its full-year Adjusted EPS guidance to $6.10 at the midpoint
Operating Margin: 13.5%, in line with the same quarter last year
Free Cash Flow Margin: 6.7%, down from 9.9% in the same quarter last year
Organic Revenue rose 5.8% year on year (16.3% in the same quarter last year)
Market Capitalization: $11.69 billion
StockStory’s Take
Woodward’s first quarter results were driven primarily by higher aerospace sales, particularly in defense original equipment and commercial aftermarket segments. CEO Chip Blankenship highlighted the company’s lean transformation and operational improvements at key manufacturing sites, such as the Rockford area plants and the Zealand facility, which enabled record output and supported strong order fulfillment. Management also pointed to a one-time spike in spare parts demand for commercial aerospace maintenance, repair, and overhaul (MRO) customers as a factor behind the quarter’s aftermarket growth.
Looking ahead, management’s guidance reflects both optimism and caution. While Woodward raised its full-year outlook, Blankenship emphasized ongoing risks, including the impact of newly announced tariffs and potential moderation in commercial aerospace services. CFO Bill Lacey noted that the company’s region-for-region production strategy should limit tariff exposure, but acknowledged that Woodward is “proactively working to mitigate the pressure on cost and any supply chain disruptions.” The company’s guidance assumes no further tariff escalation or global recession, but management remains vigilant for trade-related shocks.
Key Insights from Management’s Remarks
Woodward’s management attributed the quarter’s performance to a combination of operational improvements, product segment dynamics, and market-specific trends. The company’s commentary provided details on execution in aerospace and industrial segments, as well as updates on new technology initiatives and evolving global risks.
Aerospace aftermarket demand: Commercial aftermarket sales rose mainly due to a temporary increase in spare parts shipments to MRO facilities, with management noting this was a short-cycle event unlikely to repeat at the same scale in the near term.
Defense OE momentum: Defense original equipment (OE) sales increased substantially, driven by strong demand for smart defense programs across multiple platforms. Management expects this to remain a growth area in the second half of the year.
China on-highway headwinds: Industrial transportation revenues declined, largely due to subdued demand for heavy-duty trucks in China. Management is closely monitoring this market but has not seen signs of recovery tied to recent government stimulus.
Operational execution and lean transformation: Key manufacturing sites, including Rockford and Zealand, achieved record production levels, aided by lean initiatives and workforce onboarding. These changes underpinned improved output and service levels.
Tariff and trade risks: Management discussed the company’s region-for-region manufacturing approach as a buffer against tariffs, but acknowledged recent order reductions from Chinese customers and warned that extended trade tensions could impact marine and industrial aftermarket demand.
Drivers of Future Performance
Management’s outlook for the next quarter and full year is shaped by a mix of continued aerospace strength, operational efficiencies, and external uncertainties. The company expects high-single-digit sales growth in aerospace, steady industrial core performance, and ongoing margin discipline, while keeping a close watch on tariffs and macro risks.
Aerospace segment mix: Future performance will depend on sustained demand in defense OE and continued, but moderating, growth in commercial aftermarket and OEM aerospace sales.
Industrial segment variability: The core industrial business is expected to deliver mid-single digit growth, but China on-highway sales remain a drag and could fluctuate with policy changes or trade tensions.
Tariff exposure and supply chain: Although Woodward’s manufacturing footprint limits direct tariff impact, management is monitoring costs and potential disruptions, especially if trade actions intensify or supply chains are strained.
Top Analyst Questions
Scott Deuschle (Deutsche Bank): Asked about the source of commercial aftermarket growth; management explained the spike was due to late-quarter spare parts orders, mainly outside China, and cautioned this is not likely to repeat.
Scott Mikus (Melius Research): Questioned whether Woodward should divest the volatile China on-highway business; CEO Chip Blankenship responded that portfolio reviews are ongoing, but focus remains on operational excellence and readiness for market upturns.
David Strauss (Barclays): Inquired about the sustainability of aftermarket strength and what drove the upside; management cited better-than-expected spare parts orders for MRO and anticipated a return to more typical growth rates ahead.
Noah Poponak (Goldman Sachs): Pressed for details on aerospace segment margin guidance and LEAP engine aftermarket trends; management expects margins to moderate as the mix shifts to more defense OE and commercial OE, and noted continued LEAP volume growth but off a small base.
Sheila Kahyaoglu (Jefferies): Asked about the embedded tariff impact in guidance and drivers of defense OE growth; CFO Bill Lacey estimated $10–$15 million in tariff pressure is factored into guidance, and Blankenship attributed defense OE growth to smart defense program demand.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) whether defense OE and commercial aftermarket aerospace sales maintain their current pace or moderate as management expects; (2) any shifts in industrial segment demand, particularly regarding China on-highway and global marine markets; and (3) the extent to which announced tariffs and trade tensions impact order volumes, costs, and segment profitability. Execution of lean manufacturing initiatives and further updates on the MicroNet platform rollout will also be tracked as markers of operational progress.
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