Woodward, Inc. Q2 FY2026 earnings call

Chip mentioned Woodward delivered a strong second quarter with sales surpassing $1 billion for the first time. Team executed to meet robust demand in aerospace and industrial. Acknowledged complex global environment. Talked about market drivers, strategic investments like acquisition of Valve Research and Manufacturing, sale of pilot controls product line, relocation of servo valve production. Construction projects like Spartanburg and Glotton on track. Operational excellence with investments in automation. Innovation in aerospace and industrial.

Aerospace segment sales for the second quarter of 2026 were 703 million, an increase of 25%. Segment earnings were $158 million, or 22.5% of segment sales. Industrial segment sales for the second quarter were 387 million, an increase of 20%. Segment earnings for the second quarter of 2026 were $66 million, or 17% of segment sales

Based on strong second quarter, Woodward raised 2026 guidance. Aerospace sales growth 21 - 24% with margins 23 - 23.5%. Industrial sales growth 18 - 20% with margins 18 - 18.5%. Total sales growth 20 - 23%, adjusted EPS $9.15 - $9.45, free cash flow $300 - $350 million, cap ex ~$290 million

Risks include complex global environment with geopolitical developments potentially impacting defense spending or airline traffic. Also, product performance claim reserve in industrial

Q: On sequential commercial aftermarket sales, any drop off in spare LRU orders and concern about destocking?

A: Sequentially Q3 spare LRUs in line with first two quarters, no drop off seen yet.

Q: Thoughts on Middle East energy infrastructure reconstruction opportunity?

A: Little initial outreach seen yet, but some ongoing service activity.

Q: Aerospace margin expansion in second half?

A: Services growth, lean activity, good pricing help.

Q: Industrial core margin reserve?

A: Product reserve due to longstanding program, being discussed.

Q: Aerospace aftermarket and Woodward's position?

A: Demand still strong, Woodward has higher content on current gen narrowbody.

Q: Arrow revenue guidance raise?

A: Commercial services and OEM growth drive.

Q: Airlines sidelining less fuel-efficient aircraft risk?

A: Risk of retirement and part out, but flight hours still correlate.

Q: Pilot controls divestiture?

A: Product line small, accretive to margin.

Q: IGT customer interest and capacity expansion?

A: Multiple OEMs request capacity studies.

Q: LEAP GTF vs legacy LRU revenue?

A: Similar total service revenue now, crossover in a few quarters.

Q: China OH sales and profitability?

A: $30 million in Q3, restructuring charge in Q3.

Q: China OH impact on guidance?

A: Not driving guidance revision, success in first half with commercial aero.

Q: Industrial margin turnaround?

A: Middle innings in portfolio rationalization