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Category: Stock Market and Woodward
Date: 5 May 2020 Stock Price: $55.70 We take a look at the 2nd quarter 2020 earnings report of Woodward an independent designer, manufacturer and service provider of control solutions to the aerospace and industrial markets. Needless to say the stock of price Woodward has been hammered due to the slowdown in the airline industry
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About Woodward
Woodward is an independent designer, manufacturer, and service provider of control solutions for the aerospace and industrial markets. The company’s innovative fluid, combustion, electrical, and motion control systems help customers offer cleaner, more reliable, and more efficient equipment. Our customers include leading original equipment manufacturers and end users of their products. Woodward is a global company headquartered in Fort Collins, Colorado, USA
Overview of Woodward's 2nd quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise
- Sales: $720.220 million (down from $758.844 million for the same quarter of the previous year)
- Sales decreased by -5.1% over the last 12 months
- Total cost and expenses: $613.021 million (up from $668.676 million for the same quarter of the previous year)
- Total cost and expenses increased by -8.3% over the last 12 months.
- Net income: $91.318 million (down from $77.579 million for the same quarter of the previous year)
- Diluted income per share: $1.41 (down from $1.20 for the same quarter of the previous year)
- PE ratio of Woodward: 9.9
- Dividend declared: $0.28
- Dividend yield of Woodward: 2%
- Diluted weighted number of shares outstanding: 64.564 million (down from 64.564 million for the same quarter of the previous year)
- Cash and cash equivalents: $102.849 million
- Cash and cash equivalents per share: $2.53
- Cash and cash equivalents makes up 4.54% of Woodward's market capital
- Cash and cash equivalents makes up 2.5% of Woodward's total assets
- Receivables, net: $601.224 million
- Receivables makes up 14.8% of Woodward's' total assets
- Inventories: $530.906 million
- Inventories makes up 13.1% of Woodward's total assets
- Stockholders equity in Woodward's: $1.907 billion
- Stockholders equity per share in Woodward: $29.53
- Woodward is trading at 1.88 times its stockholders equity which is outside the expected range of between 2 and 4 times that most firms tend to trade at
- For some perspective the average price to book value of a firm in the S&P 500 is 3.34. Read more about the S&P 500 here
- Cash generated from operations: $52.179 million
- Cash generated from operations per share:: $0.81
Woodward (NASDAQ:WWD) management commentary on their 4th quarter 2019 earnings
Fort Collins, Colo., May 04, 2020 – Woodward, Inc. (NASDAQ:WWD) today reported financial results for its second quarter of fiscal year 2020 ended March 31, 2020. (All amounts are presented on an as reported (U.S. GAAP) basis unless otherwise indicated. All per share amounts are presented on a fully diluted basis. All comparisons are made to the same periods of the prior year unless otherwise stated.)
“While our second quarter performance was largely in line with our expectations, we started to see degradation during the quarter due to the COVID-19 global pandemic. As a result, we have already taken significant actions to protect the health and safety of our global employee base, preserve our financial strength and flexibility, strictly manage our cash flow, and maintain our longer-term growth position within the Aerospace and Industrial markets,” said Thomas A. Gendron, Chairman and Chief Executive Officer of Woodward. “As we look at our 150-year history, Woodward has withstood the test of time and weathered numerous economic cycles. Our management team is well-equipped to further that legacy by navigating our business through these unprecedented times of uncertainty. As in past downturns, we remain committed to investing in technology and driving operational excellence initiatives through these challenging times
“While our second quarter performance was largely in line with our expectations, we started to see degradation during the quarter due to the COVID-19 global pandemic. As a result, we have already taken significant actions to protect the health and safety of our global employee base, preserve our financial strength and flexibility, strictly manage our cash flow, and maintain our longer-term growth position within the Aerospace and Industrial markets,” said Thomas A. Gendron, Chairman and Chief Executive Officer of Woodward. “As we look at our 150-year history, Woodward has withstood the test of time and weathered numerous economic cycles. Our management team is well-equipped to further that legacy by navigating our business through these unprecedented times of uncertainty. As in past downturns, we remain committed to investing in technology and driving operational excellence initiatives through these challenging times
COVID-19 Impacts
Woodward has taken the following actions to address the economic challenges resulting from the coronavirus (COVID-19) pandemic:
Woodward has taken the following actions to address the economic challenges resulting from the coronavirus (COVID-19) pandemic:
- Workforce management through a combination of hiring freeze, layoffs and furloughs
- Reduction of company officers’ salaries and directors’ base retainers through 2020 (25% reduction for CEO and independent directors; 10% for all non-CEO officers)
- Implementation of a company-wide wage freeze
- Elimination of annual bonus payments for 2020 • Reduction of quarterly dividend
- Reduction of non-essential costs • Increased focus on reducing working capital
- Limiting capital expenditures to business-critical items
Woodward (NASDAQ: WWD) stock price history
The image below obtained from Google, shows the stock price history of Woodward (NASDAQ: WWD) for the last 5 years. Its been an average time for Woodward stockholders over the last 5 years. 5 years ago the stock of Woodward was trading at $49 and its currently trading at $55.70 a stock. That's a healthy 13.7% return provided to Woodward stockholders over the last 5 years.
Woodward's stock is trading at a lot closer to its 52 week low of $46.50 than it is to its 52 week high of $129.06 which to us is a clear indication that the short term sentiment and momentum of Woodward's stock is very negative at this point in time, in line with the sentiment of the stocks of the main industries that they serve, the airline industry. For example take a look at stocks such as Delta Airlines
Woodward's stock is trading at a lot closer to its 52 week low of $46.50 than it is to its 52 week high of $129.06 which to us is a clear indication that the short term sentiment and momentum of Woodward's stock is very negative at this point in time, in line with the sentiment of the stocks of the main industries that they serve, the airline industry. For example take a look at stocks such as Delta Airlines
Recent coverage of Woodward
The extract below covers the latest regarding Woodward as obtained from TheStreet.com (dated 6 April 2020)
Boeing (BA) - Get Report suppliers Woodward (WWD) and Hexcel (HXL) said Monday they were scrapping their merger plans as part of their response to the "unprecedented challenges" caused by the coronavirus pandemic. The companies, which make and supply aircraft parts, in January had agreed to combine in a $6.4 billion deal.
Woodward shares at last check were up 7.9% to $55.29, while Hexcel was off 2.6% to $30.77. Boeing was up 9.5% to $136.29. Tom Gendron, chairman, president and chief executive of Woodward, and Nick Stanage, Hexcel's chairman, president and CEO, said in a joint statement that "although we are disappointed with this outcome, we are confident this is the right decision for our customers, our shareholders, and our employees."
Woodward, the Fort Collins, Colo., producer of control systems and parts, said it would freeze hiring; cut and furlough staff; freeze wages companywide; cut company officers’ salaries and directors’ base retainers through 2020; and eliminate annual bonus payments. Woodward also withdrew its full-year 2020 guidance and reduced its quarterly dividend to 8.125 cents a share.
In addition, Woodward said that Gendron, 59, who had said he would retire a year after the merger closed, will continue to serve in his current posts. Hexcel, the Stamford, Conn., producer of composite materials for aerospace, defense and industrial markets, among other measures implemented a hiring freeze, restricted travel, curtailed capital spending, and is "evaluating employment levels to align with lower customer demand."
Read the full article here
Boeing (BA) - Get Report suppliers Woodward (WWD) and Hexcel (HXL) said Monday they were scrapping their merger plans as part of their response to the "unprecedented challenges" caused by the coronavirus pandemic. The companies, which make and supply aircraft parts, in January had agreed to combine in a $6.4 billion deal.
Woodward shares at last check were up 7.9% to $55.29, while Hexcel was off 2.6% to $30.77. Boeing was up 9.5% to $136.29. Tom Gendron, chairman, president and chief executive of Woodward, and Nick Stanage, Hexcel's chairman, president and CEO, said in a joint statement that "although we are disappointed with this outcome, we are confident this is the right decision for our customers, our shareholders, and our employees."
Woodward, the Fort Collins, Colo., producer of control systems and parts, said it would freeze hiring; cut and furlough staff; freeze wages companywide; cut company officers’ salaries and directors’ base retainers through 2020; and eliminate annual bonus payments. Woodward also withdrew its full-year 2020 guidance and reduced its quarterly dividend to 8.125 cents a share.
In addition, Woodward said that Gendron, 59, who had said he would retire a year after the merger closed, will continue to serve in his current posts. Hexcel, the Stamford, Conn., producer of composite materials for aerospace, defense and industrial markets, among other measures implemented a hiring freeze, restricted travel, curtailed capital spending, and is "evaluating employment levels to align with lower customer demand."
Read the full article here
Recent Google search trends for Woodward stock price and WWD stock price
The graphic above shows recent Google search trends for Woodward stock price and WWD stock price over the last 12 months in the United States. As it shows searches for these two search terms is relatively erratic and there is not a lot of consistent searches for these terms.
Woodward (NASDAQ: WWD) stock valuation
So what do we value Woodward stock at after their 2nd quarter 2020 earnings report and their Covid-19 update provided? Based on their 2nd quarter 2020 earnings report our valuation model provides a target price (full value price) for Woodward stock at $51.20 a stock (down significantly from our 4th quarter 2019 valuation of Woodward, largely due to the impact of Covid-19 on their current and future earnings potential).
We therefore believe the stock of Woodward is overvalued at its current price. We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $51.20. A good entry point into Woodard would therefore be at $46 or below.
We expect the stock of Woodward to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
We therefore believe the stock of Woodward is overvalued at its current price. We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $51.20. A good entry point into Woodard would therefore be at $46 or below.
We expect the stock of Woodward to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
Next earnings release of Woodward
It is expected that Woodward will release their 3rd quarter 2020 earnings report in early August 2020