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Woodward (WWD) Hits 52-Week High on Operational Excellence

Zacks Equity Research

Shares of Woodward, Inc. WWD scaled a new 52-week high of $129.06 in yesterday’s trading session, before closing a tad lower at $127.84. In the past year, the stock has surged 68.6% compared with 33.9% growth recorded by the industry.



The Zacks Rank #3 (Hold) stock, with market cap of nearly $7.6 billion, has impressed investors with its recent earnings streak. It topped estimates thrice in the trailing four quarters, the beat being 17.2%, on average. It has long-term earnings growth expectation of 13.1%.

What’s Driving the Rally?

Fort Collins, CO-based Woodward is optimistic about its markets, performance and outlook on the back of enhanced operational execution while delivering greater value to stakeholders. The company operates in two segments, Aerospace and Industrial, which are benefiting from strong product portfolios and healthy market fundamentals. Its strategy to become a systems integrator increased contract flow substantially, enabling it to capture a larger market share in the commercial aircraft field.

Woodward’s Aerospace segment is expected to deliver strong performance driven by global passenger and cargo growth. In Industrial markets, it is witnessing robust growth in distributed power for data center applications. Woodward L’Orange is likely to boost Industrial segment with respect to both sales and earnings.

The company had issued (in concurrent with fourth-quarter fiscal 2019 results) a bullish outlook for fiscal 2020. It expects aggregate net sales of $3-$3.1 billion, with about 6% rise in Aerospace sales year over year. Adjusted earnings per share are anticipated between $5.30 and $5.60, based on about 64 million outstanding shares.

On Jan 12, 2020, Woodward and Hexcel Corporation HXL announced an agreement to combine in an all-stock merger of equals to create a premier integrated systems provider. The terms of the agreement have been approved by the boards of directors of both companies. The combined company, to be named Woodward Hexcel, will focus on technology-rich innovations to deliver smarter and safer customer solutions.

Upon completion of the merger, existing Woodward shareholders will own approximately 55% and Hexcel shareholders will own 45% of Woodward Hexcel. In connection with this transaction, Woodward has increased its quarterly cash dividend to 28 cents per share.  

Woodward Hexcel will be among the top independent aerospace and defense suppliers globally by revenues. It will have more than 16,000 employees, manufacturing operations in 14 countries on five continents and a diversified customer base across multiple markets.

The transaction is now subject to the approval of the shareholders of both Woodward and Hexcel, and regulatory approvals. The parties expect the merger to close in third-quarter 2020.

Key Picks

Investors who are looking for solid profits in 2020 may consider some better-ranked stocks in the broader industry. These include Sogou Inc. SOGO and the Rubicon Project, Inc. RUBI, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sogou has a long-term earnings growth expectation of 20.2%.

Rubicon surpassed earnings estimates in each of the trailing four quarters, the surprise being 86.7%, on average.

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The Rubicon Project, Inc. (RUBI) : Free Stock Analysis Report
 
Hexcel Corporation (HXL) : Free Stock Analysis Report
 
Woodward, Inc. (WWD) : Free Stock Analysis Report
 
Sogou Inc. Sponsored ADR (SOGO) : Free Stock Analysis Report
 
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