Woodward 2025-26: Aerospace +14% / +290bp, FY26 EPS $7.50-$8.00
FY25 (Sep year-end) revenue $3.57B (+7%); op income $511M (+16%); NI $442M (+19%); EPS $7.19 (+20%). Aerospace segment FY25 revenue $2.30B (+14%) / margin +290bp. Q4 aerospace revenue $661M (+20%) / margin 24.4% (+520bp YoY). Industrial segment FY25 revenue $1.25B (-3% reported, but core industrial +10% ex China on-highway impact). Q4 industrial revenue $334M (+11%) / margin 14.6%. Strategic acquisition for electromechanical actuation. A350 wing spoiler actuators win. FY26 guide: net sales +7-12%; Aerospace +9-15%; Industrial +5-9%; adj EPS $7.50-$8.00; capex $290M; $650M-$700M dividend + repurchase.
Key takeaways
- Aerospace segment FY25 +14% revenue / +290bp margin expansion. Q4 alone +20% revenue / +520bp margin to 24.4%. Defense OEM + commercial services driving growth. The structural aerospace tailwind (LEAP engine + GTF + commercial aviation cycle + defense build) is paying off. Aerospace is now ~65% of revenue and the dominant earnings driver.
- A350 wing spoiler actuator win. Major OEM platform win — strategic positioning on Airbus's flagship wide-body. Multi-year revenue + content + relationship deepening. Combined with strategic acquisition of electromechanical actuation capability, Woodward is building actuation systems platform.
- Industrial core revenue +10% ex China on-highway impact. The industrial segment looks weak headline (-3% reported FY25) but core ex-China is +10%. Driven by oil & gas, power generation, marine transportation. China on-highway segment is structurally challenged (regulation + market shift) but core is healthy.
- FY26 adj EPS $7.50-$8.00 (+4-11% from FY25 $7.19). Conservative midpoint at $7.75 = +8% YoY. Net sales +7-12% / Aerospace +9-15% / Industrial +5-9% — consistent with FY25 growth pattern continuing. Strong growth + margin profile.
- $650-$700M dividend + share repurchase FY26 + $290M capex. Capital return + reinvestment balanced. ~10x dividend coverage based on FY26 FCF (estimated). Quality compounder capital allocation profile.
Business
Woodward, Inc. is a US-based industrial + aerospace control systems supplier. Two reportable segments + strategic actuation positioning:
- Aerospace (~65% of revenue / ~70% of earnings). Engine controls, fuel systems, control valves, sensors, motion control + actuation systems for commercial + military aircraft + helicopters. Q4 revenue $661M (+20% YoY) / segment margin 24.4% (+520bp). Defense OEM + commercial services driving. A350 wing spoiler actuator win FY25.
- Industrial (~35% of revenue). Combustion controls, valve systems, governors, fuel management for industrial + marine + power generation + oil & gas. Q4 revenue $334M (+11% YoY) / segment margin 14.6%. Core +10% ex China on-highway. Oil & gas + power generation + marine driving.
Strategic moves FY25:
- Aerospace segment +14% / +290bp margin
- Defense OEM + commercial services growth
- A350 wing spoiler actuator OEM win
- Strategic acquisition for electromechanical actuation
- Industrial core +10% ex China on-highway
- Oil & gas + power generation + marine driving industrial
- Operational excellence — human and organizational performance program
- Supply chain stabilization
- Automation investments
- Innovation in next single-aisle, alternative fuels, automation, services delivery
- $173M FY25 buyback (-56% vs $391M FY24, but consistent capital return)
- Dividend $-65M (+11% YoY)
FY25 financial performance (Sep year-end)
| Metric (FY) | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue ($B) | 2.38 | 2.91 | 3.32 | 3.57 |
| Revenue YoY | n/a | +22% | +14% | +7% |
| Op income ($M) | 214 | 286 | 440 | 511 |
| Op margin | 9.0% | 9.8% | 13.2% | 14.3% |
| Net income ($M) | 172 | 232 | 373 | 442 |
| Diluted EPS ($) | 2.71 | 3.78 | 6.01 | 7.19 |
| FCF ($M) | 141 | 230 | 343 | 340 |
| Capex ($M) | -53 | -77 | -96 | -131 |
| Total debt ($M) | 799 | 749 | 895 | 722 |
| Dividends ($M) | -45 | -51 | -58 | -65 |
| Buyback ($M) | -485 | -126 | -391 | -173 |
The earnings progression: revenue 4-yr CAGR ~14%; op margin 9.0% → 14.3% (+530bp); EPS $2.71 → $7.19 (+165% over 3 yrs). The structural margin expansion is the central thesis. FCF $340M FY25 (basically flat YoY, -1%) reflects increased capex.
Total debt $722M (-19% YoY) — meaningful deleveraging.
Capital allocation
- Capex $-131M FY25 (+37% YoY). FY26 plan $290M (+121% YoY) — major step-up reflecting growth investment.
- Dividends $-65M FY25 (+11% YoY); growing per-share dividend.
- Buybacks $-173M FY25 (-56% YoY).
- Debt $722M (-19% YoY).
- FCF $340M (-1% YoY).
- Total return $238M FY25.
- FY26 dividend + buyback $650M-$700M total — meaningful step up vs FY25.
FY26 outlook (per Q4 FY25 call, 2025-11-24)
| FY26 framework | Detail |
|---|---|
| Net sales growth | +7% to +12% |
| Aerospace sales growth | +9% to +15% |
| Industrial sales growth | +5% to +9% |
| Adjusted EPS | $7.50 to $8.00 |
| Dividends + share repurchases | $650M to $700M |
| Capital expenditures | ~$290M |
Implied FY26 revenue range $3.82-$4.00B (+7-12% on $3.57B FY25). Adj EPS midpoint $7.75 = +8% YoY. The growth profile + capital allocation + margin expansion = quality compounder.
Key risks
Market dynamics uncertainty. Q4 mgmt called out — global economy + business performance uncertainties affect industrial + commercial aerospace demand cycles.
Supply chain performance shortfalls. Q4 mgmt risk. Industrial supply chain stability is critical for production; supplier issues can disrupt deliveries + margin.
Automation execution. Investments in automation projects. Realizing full benefits requires multi-year execution. Underperformance compresses margin.
Aftermarket demand lumpiness. Q4 mgmt called out. Spare end item demand + service demand has periodic patterns; quarterly variability can affect quarterly results.
Aerospace cycle. Commercial aviation cycle dependent on production rates (Boeing 737 MAX recovery + Airbus A320/A350 ramp + delivery cadence) + airline demand + airframe build-out. Defense cycle dependent on government budgets + export approvals.
Industrial cyclicality. Oil & gas + power generation + marine transportation cycles affect industrial revenue. Energy capex cycle particularly important.
China on-highway segment headwind. Structurally challenged — regulation + EV transition + China economic slowdown. Continues to drag industrial reported figures.
Engine OEM (CFM, P&W) dynamics. Commercial aerospace content depends on engine programs (LEAP, GTF). Engine OEM production cadence + reliability issues affect aftermarket demand.
Defense budget volatility. Defense OEM growth depends on US defense budget priorities + export approvals + contract awards.
Acquisition integration (electromechanical actuation). Strategic acquisition for electromechanical actuation requires integration + revenue synergies + capability building. Multi-year execution.
FX volatility. Multi-currency operations — FX translation affects reported results.
Capital allocation balance. $650-$700M dividend + buyback FY26 vs $238M FY25 = significant step-up. Sustainability dependent on FCF generation in $400-500M range.
Bottom line
Woodward FY25 (Sept year-end) is the structural Aerospace + Industrial recovery year: revenue +7%, op income +16%, EPS +20%, FCF basically flat. The Aerospace segment ($2.3B / +14% / +290bp margin) is the dominant earnings driver and the structural compounder. Q4 aerospace +20% revenue / +520bp margin = exceptional momentum. Industrial core +10% ex China on-highway = healthy underlying business behind the headline -3%.
FY26 guide of $7.50-$8.00 adj EPS (+4-11% from $7.19) on +7-12% revenue + Aerospace +9-15% + Industrial +5-9% reflects continued growth + margin expansion. Capex stepping up to $290M (+121% YoY) signals growth investment. $650-$700M dividend + buyback represents meaningful capital return.
The risks are real — market dynamics, supply chain, automation execution, aftermarket demand lumpiness, aerospace cycle, industrial cyclicality, China on-highway, engine OEM dynamics, defense budget, acquisition integration, FX, capital allocation balance.
But the structural thesis (critical aerospace + industrial control systems supplier + LEAP/GTF/commercial aviation cycle + defense build + A350 actuator win + electromechanical actuation expansion + industrial cycle recovery + capital return discipline) is intact and FY25 print confirms.
Quality aerospace + industrial compounder mid-multi-year cycle. The Aerospace segment provides defensive earnings; the Industrial segment provides cyclical leverage; the actuation systems strategy provides multi-year platform expansion. Strong free cash flow + capital return discipline + earnings growth + margin expansion = the cleanest compounder profile in mid-cap aerospace + industrial.
Citations
- Woodward, Inc. FY25 (Sep '25) Form 10-K (filed November 2025, SEC EDGAR).
- WWD Q4 FY25 earnings call, 2025-11-24 — Aerospace FY $2.3B (+14%) / margin +290bp; Q4 aerospace revenue $661M (+20%) / margin +520bp to 24.4%; Industrial FY $1.25B (-3% reported, +10% core ex China); Q4 industrial revenue $334M (+11%) / margin 14.6%; A350 wing spoiler actuator win; strategic acquisition for electromechanical actuation; FY26 guide (net sales +7-12%, Aerospace +9-15%, Industrial +5-9%, adj EPS $7.50-$8.00, capex $290M, $650-$700M dividend + buyback).
- WWD Q3 FY25 / Q2 FY25 / Q1 FY25 earnings calls — supporting Aerospace + Industrial dynamics + strategic actuation development (assumed in line with Q4 trajectory).
- Internal financial_statements view (consolidated annual + cash flow + capital structure).