On Tuesday, Deutsche Bank (ETR:DBKGn) updated its outlook on Woodward (NASDAQ:WWD), a prominent aerospace and industrial manufacturer, by raising its price target to $200 from $182, while maintaining a "Buy" rating on the stock. The firm's analysis highlighted a robust second fiscal quarter performance by Woodward, paired with a significant upward revision for the full-year forecast.
Woodward has reported an 8% increase in free cash flow (FCF) and a 13% rise in full-year earnings per share (EPS), leading to an anticipated 19% upward revision in 2024 EPS, based on the original guidance provided just two quarters ago.
The company's FY24 EPS guidance midpoint now stands at an impressive 114% above FY22 figures, with FCF per share up by 154%. This growth trajectory underscores the effective operational improvements under the leadership of Mr. Blankenship, positioning Woodward among the top assets in Deutsche Bank's coverage universe.
The bank also identified several factors that could contribute to further estimate increases for Woodward in the year ahead. Aerospace margins are seen as particularly conservative, with expectations for an increase in the second half of the year, contrary to guidance suggesting a decrease.
Additionally, the prospects for commercial aftermarket growth remain robust, with a steady defense original equipment and aftermarket outlook. Industrial demand also shows promise, supported by strong order growth in related sectors and favorable market conditions in the China natural gas truck business.
Woodward's capital return strategy is another aspect expected to bolster the second half of the year's performance. With a cash balance of $317 million at the end of the second fiscal quarter and a projected $263 million in free cash flow for the second half, Woodward appears committed to its stock buyback program.
Deutsche Bank's stance is that Woodward trades at a discount compared to its high-quality peers despite outpacing them in EPS and FCF per share growth, driving stronger revisions, and offering a superior long-term organic growth narrative, all while maintaining lower leverage.
In conclusion, Deutsche Bank reiterated its "Buy" rating for Woodward, citing a 32% potential upside to the newly set target price and reaffirming the stock as a top pick in its category.
InvestingPro Insights
Woodward's (NASDAQ:WWD) recent performance and future prospects are further illuminated by real-time data from InvestingPro. With a market capitalization of $9.11B and a notable revenue growth of 23.49% in the last twelve months as of Q2 2024, the company demonstrates a strong financial position. The adjusted P/E ratio for the same period stands at 23.91, suggesting that the stock is trading at a reasonable price relative to its earnings growth. Additionally, Woodward's gross profit margin at 26.54% reflects its ability to maintain profitability.
InvestingPro Tips underscore the company's stability and potential for growth. Woodward has not only maintained dividend payments for an impressive 52 consecutive years but has also raised its dividend for the last three years. This consistent return to shareholders is complemented by the company's low price volatility, making it an attractive option for investors seeking stability. Moreover, analysts have revised their earnings upwards for the upcoming period, indicating confidence in Woodward's financial trajectory.
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