Woodward's Strong OEM Sales Performance Drives Q1 Earnings Surge, Crushing Expectations

Woodward, Inc. (WWD) delivered an exceptional first quarter of fiscal 2026, riding the momentum of robust oem sales across both its Aerospace and Industrial segments. The company posted adjusted earnings per share of $2.17, representing a stunning 60.7% year-over-year jump that handily exceeded the Zacks Consensus Estimate by 31.5%. This performance underscores the strength of demand in commercial and defense oem markets that are driving the company’s outperformance this fiscal year.

The growth extended across the top line, with quarterly net sales reaching $996 million, up 29% year over year and surpassing consensus estimates by 10.1%. Management emphasized that the company “delivered a strong first-quarter 2026 performance that exceeded expectations, reflecting broad-based year-over-year growth across both segments, driven by strong demand and disciplined execution by our global teams.”

Post-announcement, investor confidence surged, with shares climbing 15% in after-market trading. Over the past twelve months, WWD stock has gained 78.3%, substantially outpacing the broader Aerospace - Defense Equipment industry’s 39.9% rise—a testament to the company’s strategic execution in capturing oem sales opportunities.

OEM Sales Drive Aerospace Segment to Impressive 29% Growth

The Aerospace segment emerged as a key growth engine, with net sales climbing to $635 million, up 29% year over year. The expansion was fueled by broad-based strength across commercial services, commercial oem and defense oem categories. Notably, commercial oem sales jumped 22% year over year, while commercial services operations accelerated 50%—demonstrating the company’s success in capturing higher-margin service revenue alongside traditional oem sales.

Defense oem and defense services also contributed meaningfully, with sales rising 23% and 1%, respectively. While the defense oem growth was more modest on a percentage basis, the absolute contribution remained substantial given the segment’s scale.

The bottom line performance was equally impressive. Segmental earnings reached $148 million, compared with $95 million a year earlier—a 55.8% increase. This margin expansion was driven by effective price realization, a more favorable product mix benefiting from stronger commercial oem penetration, and higher sales volumes. Segment margins expanded by 420 basis points to 23.4%, even as the company absorbed planned investments in manufacturing capacity and ongoing inflationary pressures.

Industrial Segment Capitalizes on Diverse OEM Opportunities

The Industrial segment demonstrated comparable momentum, posting net sales of $362 million, representing 30% year-over-year growth. This expansion reflected strength across transportation, power generation and oil & gas markets. Core industrial sales, excluding the China on-highway impact, grew 22%—highlighting the diversification of the oem sales base beyond geographic concentrations.

Transportation oem sales proved particularly robust, surging 55%, while oil and gas sales climbed 28%. Power generation grew a modest 7%, but this reflects the prior-year sale of the combustion business. Excluding that divestiture, power generation revenues would have expanded in the mid-20s on a percentage basis, signaling underlying strength in energy transition demand.

Industrial segment earnings rose to $67 million from $40 million in the prior year—a 67.5% surge. The core industrial segment achieved margin expansion of 410 basis points to 18.5% of sales, driven by strong pricing realization, higher volumes and favorable product mix, despite headwinds from inflationary pressures.

Enhanced Profitability and Financial Strength

Gross margin improved substantially, climbing 480 basis points year over year to 29.3%, reflecting the higher-margin oem sales mix and operational leverage. Total costs and expenses reached $827.3 million, up 23.3% year over year—a more measured pace than the 29% revenue growth, underscoring operational discipline.

Adjusted EBITDA surged to $207.8 million compared with $134.9 million a year ago, demonstrating the operating leverage inherent in the company’s growth strategy. The company also strengthened its cash generation capabilities, producing $114.4 million in operating cash flow during the quarter versus $34.5 million in the prior year. Free cash flow reached $70 million compared with $1 million a year earlier.

This uptick was driven by strong aerospace commercial services demand and higher China on-highway revenue within Industrial, even as the company maintained steady production levels despite fewer working days during the holiday-shortened quarter. Capital expenditures reached $44 million, with management signaling that spending will rise meaningfully in the remaining quarters to support the Spartanburg facility build-out and ongoing automation initiatives.

Shareholder Returns and Balance Sheet Health

Woodward demonstrated confidence in its growth trajectory through robust shareholder returns. During the quarter, the company distributed $146 million to shareholders, comprising $17 million in dividends and $129 million in share repurchases. As of December 31, 2025, the company maintained $454.3 million in cash and cash equivalents, balanced against $457 million of long-term debt, providing substantial financial flexibility.

Management Raises Full-Year Guidance on Sustained Oem Demand

Building on strong first-quarter execution, Woodward significantly raised its fiscal 2026 guidance, signaling management’s confidence in sustained oem sales momentum. Consolidated net sales are now expected to grow 14% to 18% compared with the previous guidance of 7% to 12%—a substantial upward revision.

The Aerospace segment is projected to expand 15% to 20%, versus the earlier projection of 9% to 15%, while Industrial is anticipated to increase 11% to 14% compared with the prior expectation of 5% to 9%. These upward revisions underscore the company’s confidence in robust demand across oem markets.

Segment profitability guidance also improved. The Aerospace segment is still expected to deliver earnings of 22% to 23% of segment sales, while Industrial segment earnings are estimated at 16% to 17% of sales, compared with the prior view of 14.5% to 15.5%. Adjusted free cash flow is anticipated in the range of $300 million to $350 million.

Management indicated plans to wind down the China on-highway business by fiscal year-end, further streamlining the portfolio and clarifying growth trajectories. Importantly, adjusted earnings per share guidance was raised to $8.2-$8.6 from the previous expectation of $7.5-$8.0—reflecting the company’s trajectory toward record profitability.

Industry Peers Report Mixed Results Amid Aerospace Momentum

While Woodward led the aerospace pack, competing companies showed varied performance. Teledyne Technologies (TDY) reported fourth-quarter adjusted earnings of $6.30 per share, surpassing Zacks Consensus Estimate of $5.83 by 8.1%. The bottom line improved 14.1% from the prior-year quarter’s $5.52. Total sales reached $1.61 billion, beating estimates of $1.57 billion by 2.7%, while the top line surged 7.3% year over year.

Textron Inc. (TXT) posted fourth-quarter adjusted earnings of $1.73 per share, narrowly missing the Zacks Consensus Estimate of $1.74 by 0.8%. However, the bottom line climbed 29.1% from $1.34 in the prior-year quarter. Total revenues of $4.18 billion outpaced the Zacks Consensus Estimate of $4.14 billion by 0.8%, with the top line rising 15.7% year over year.

Hexcel Corporation (HXL) reported fourth-quarter adjusted earnings of $0.52 per share, matching the prior-year figure but topping the Zacks Consensus Estimate of $0.50 by 4%. Net sales of $491.3 million beat Zacks estimates of $478 million by 2.7%, while the top line edged up 3.7% year over year.

Investment Thesis and Forward Outlook

Woodward’s performance exemplifies the structural tailwinds supporting aerospace and industrial companies in the current environment. The company’s execution in capturing oem sales opportunities, coupled with margin expansion and improved cash generation, positions it attractively within the aerospace-defense equipment sector.

Zacks Investment Research has assigned Woodward a Rank #2 (Buy) rating, reflecting confidence in the company’s ability to sustain its growth trajectory. The substantial upward revision to full-year guidance, supported by visible oem sales momentum across multiple end markets, reinforces the thesis that the company is well-positioned to deliver outsized returns to investors in fiscal 2026 and beyond.