Woodward Buffeted By Turbulence On Multiple Sides, But Results Should Improve

It seems at times that Woodward (NASDAQ:WWD) just can’t get a break. Long a leader in complex control systems and components that play essential roles in aviation propulsion and actuation, Woodward invested meaningful sums between 2013 and 2019 to add capacity in anticipation of a significant commercial aerospace ramp… only to get kicked in the head by the COVID-19 pandemic and the temporary collapse of the commercial aviation market. Then, more recently, as commercial aviation has started to recover, Woodward has found itself hamstrung by component and labor issues, as well as component/production difficulties at other suppliers that have led to some disappointments in commercial build-rates.

I look at Woodward’s leverage to the aviation recovery, and I think management has a fairly realistic (if not conservative) view on how build-rates will reaccelerate. I like the company’s industrial business in general, though the near-term outlook is shakier given ongoing issues in China. Trading at close to $100, I don’t see tremendous fundamental undervaluation, but I do acknowledge that this is a stock that could rerate more strongly as aviation builds accelerate and margins expand.

 

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Woodward Buffeted By Turbulence On Multiple Sides, But Results Should Improve