Woodward (WWD 0.48%), a leading provider of control solutions for aerospace and industrial markets, released its earnings results for the third quarter of fiscal 2025 on July 28, 2025. The company reported revenue of $915 million (GAAP) for Q3 FY2025, outpacing consensus expectations of $886.15 million (GAAP). Earnings per share (EPS, GAAP) reached $1.76 for Q3 FY2025, also above the $1.63 analyst forecast (GAAP). This quarter was marked by a standout performance in the aerospace segment, despite ongoing difficulties in the industrial division and a marked drop in free cash flow. Overall, the company delivered improved profits and revenue (GAAP), but flagged soft spots and revised a key cash flow target downward.
| Metric | Q3 2025 | Q3 2025 Estimate | Q3 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $1.76 | $1.63 | $1.63 | 8.0 % |
| Revenue | $915 million | $886.15 million | $847.7 million | 8.0% |
| EBIT (Non-GAAP) | $137.2 million | $131.9 million | 4.0 % | |
| Free Cash Flow (Non-GAAP) | $99 million | $137 million | (27.8 %) | |
| Revenue – Aerospace segment | $596 million | $518 million | 15.2 % | |
| Revenue – Industrial segment | $319 million | $330 million | -3.3 % |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q2 2025 earnings report.
About Woodward: Business Overview and Focus Areas
Woodward designs and manufactures advanced control systems for the aerospace and industrial markets. The company develops technology to manage and optimize energy use, including systems for controlling the flow of fluids, combustion, and electrical power, as well as devices for precision movement in critical machines.
The company's success depends on several key focus areas. A strong presence in aerospace and defense, especially through involvement in platforms like the Boeing 787 and F-35, is vital. In the industrial sector, Woodward's controls are used in power generation, oil and gas, and transportation—sectors sensitive to broad economic and regulatory trends. The company invests heavily in research and development to meet new efficiency and emissions standards. Long-standing relationships with major customers also remain central to its growth strategy.
Quarterly Highlights: Segment Trends, Financials, and Key Events
Woodward's quarterly results drew strength from the aerospace division. Aerospace sales rose 15.2% compared to the prior year, led by strong demand in defense original equipment (OEM, meaning items provided to plane makers and the military) and commercial aftermarket (spare parts and servicing). Defense OEM sales were up more than 55% for the three months ended June 30, 2025 versus the prior year, while commercial aftermarket revenue jumped 30% (GAAP). Segment margin—a percentage showing how much profit is left after costs within the division—expanded to 21.1%, from 19.7% last year. Management cited pricing power and higher sales volumes as drivers behind these gains, noting some investments in manufacturing and innovation that partly offset that growth. However, executives also warned that the unusually strong surge in aftermarket sales, particularly spare parts, is not likely to repeat at the same level in coming quarters.
The industrial division faced persistent weakness. Segment sales fell 3.2% year over year for the three months ended June 30, 2025, pressured by a continued drop in China on-highway natural gas truck demand—a key issue for the transportation business line. Transportation-related revenue fell 12.0% (GAAP). Oil and gas saw double-digit growth, while power generation revenue was roughly flat. The industrial margin dropped to 14.9 %, from 18.1 % in the prior year, reflecting reduced volumes and lower profit contribution from China business. Management acknowledged the "lumpy" nature of these industrial markets, with results swinging on the timing of large orders and projects.
Research and development spending (GAAP) continued to rise, reaching $41.1 million, as Woodward pushed forward on new offerings. Among highlights was the MicroNet XT, an advanced turbine control system for marine and industrial engines, which began deliveries to the U.S. Navy for use in destroyer-class ships.
Free cash flow (non-GAAP)—a metric that subtracts capital spending from operating cash generation—fell 27.8% compared to the same period last year. Management linked the decrease to higher working capital requirements. The company returned $45 million to shareholders through share repurchases and paid $17 million in dividends for the period.
Looking Ahead: Guidance and Investor Focus
Woodward raised its full-year sales guidance (GAAP) to the range of $3,450–3,525 million, up from the previous forecast of $3,375–3,500 million. Adjusted EPS (non-GAAP) guidance was also lifted to $6.50–6.75, up from $5.95–6.25. However, management lowered its full-year adjusted free cash flow target to $315–350 million, down from $350–400 million.
Key risks for investors include whether aerospace aftermarket and defense OEM demand can be sustained, and risks remain around continued China transportation weakness, tariff pressures of $10–15 million, and customer concentration, with the top five customers still accounting for a large share of total sales.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
