Aerospace and defense company Woodward (NASDAQ: WWD) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 16.5% year on year to $995.3 million. Its GAAP profit of $2.23 per share was 18.6% above analysts’ consensus estimates.

Is now the time to buy WWD? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Woodward’s third quarter results were well received by the market, with management highlighting strong execution across both its aerospace and industrial businesses. The quarter benefited from robust demand in commercial aerospace services and defense original equipment manufacturing, as well as successful price realization and operational improvements. CEO Charles Blankenship credited the company’s ability to capture higher-than-expected commercial services demand and double-digit growth in oil and gas and power generation in the industrial segment. Management also pointed to the positive impact of increased automation and improved supply chain performance on margins and productivity.

Looking ahead, management is focused on capitalizing on sustained demand in commercial aerospace, ongoing defense programs, and further investment in automation and capacity expansion. CEO Blankenship explained that the company expects LEAP and GTF engine repair activity to surpass legacy repair revenue by late 2026 or early 2027, reflecting a shift in the aerospace aftermarket mix. The company anticipates continued growth in defense OEM and incremental gains from strategic investments in manufacturing and regional service capabilities. Management noted that elevated capital expenditures, particularly for the new Spartanburg facility, will support future growth but may moderate near-term free cash flow.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to strong commercial services in aerospace, growth in defense OEM, and solid industrial segment execution, underpinned by pricing, automation, and targeted capacity investments.

• Commercial services demand surge: The aerospace segment benefited from higher-than-expected demand in commercial engine maintenance, repair, and overhaul (MRO), particularly for legacy engines and increasing LEAP and GTF activity. Management noted that recent quarters saw significant orders for spare end items, influenced in part by trade and tariff uncertainty, which boosted top-line results but may not recur in the near term.

• Defense OEM momentum: Defense original equipment manufacturing (OEM) sales rose sharply as the company delivered on smart defense programs like JDAM, benefiting from price increases and healthy end-market demand. Management expects continued strength, with some guided weapons programs showing indications of future capacity expansion requests from customers.

• Industrial segment diversification: Growth in the industrial segment was driven by double-digit gains in oil and gas and power generation, as well as high single-digit growth in marine transportation. Management cited operational improvements and strong pricing as key contributors, particularly in power generation, where non-traditional applications like behind-the-meter installations have created new opportunities.

• Strategic manufacturing investments: The company advanced its automation initiatives and broke ground on the Spartanburg, South Carolina facility, targeting increased capacity for aerospace (including Airbus A350 spoiler actuators) and select industrial products. These projects are designed to improve productivity, reduce labor needs, and support future growth.

• Supply chain and operational improvements: Management highlighted progress in stabilizing the supplier network and optimizing internal operations. Investments in immersive training and automation are beginning to reduce injury risks, increase throughput, and improve cost structure across both core segments.

Drivers of Future Performance

Woodward’s future growth will be shaped by ramping aerospace production, automation-driven productivity, and ongoing investments in capacity and services.

• Aerospace OEM and aftermarket shift: Management expects a mix shift toward increased commercial OEM sales as airframe and engine manufacturers stabilize and ramp production rates. While commercial services growth is forecast to moderate due to prior advanced purchases, LEAP and GTF engine MRO activity is anticipated to grow, with repair revenues overtaking legacy platforms by late 2026.

• Continued industrial expansion: The company anticipates sustained demand in transportation, power generation, and oil and gas, along with growth in regional service and upgrade offerings. Management’s investments in regional MRO shops are intended to place Woodward closer to customers, increasing aftermarket content and supporting recurring revenue streams.

• Operational efficiency and capital allocation: Ongoing automation projects and the opening of the Spartanburg facility are expected to drive productivity and margin improvements. However, management cautions that elevated capital expenditures and strategic investments may temper free cash flow in the near term, even as these initiatives position the company for long-term earnings growth.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) the ramp-up in aerospace OEM production rates and the corresponding impact on segment mix and profitability, (2) execution and productivity gains from automation and the Spartanburg facility build-out, and (3) growth in industrial aftermarket and regional service expansion. Progress on these milestones will indicate whether Woodward can sustain its growth trajectory while managing the effects of elevated investment and evolving demand patterns.

Woodward currently trades at $275.13, up from $265.14 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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