Woodward (NASDAQ: WWD) reported Q1 EPS of $1.10, $0.08 better than the analyst estimate of $1.02. Revenue for the quarter came in at $720 million versus the consensus estimate of $669.63 million.

First Quarter Highlights

• Net sales were $720 million, compared to $653 million, an increase of 10 percent.
• Net earnings were $53 million, compared to $49 million.
• Adjusted net earnings1 were $71 million, compared to $62 million.
• Earnings per share increased to $0.83, up from $0.77.
• Adjusted earnings per share1 was $1.10, up from $0.96.
• Cash from operations was $27 million; adjusted free cash flow1 was $29 million.

“We delivered a solid quarter to start fiscal year 2020. Aerospace continues to perform very well despite ongoing uncertainty surrounding the 737 MAX aircraft, while Industrial performance was in line with our expectations,” said Thomas A. Gendron, Chairman and Chief Executive Officer of Woodward. “In January, we announced our planned merger with Hexcel Corporation to form Woodward Hexcel, a premier integrated systems provider serving the aerospace and industrial sectors. Woodward Hexcel will focus on technology-rich innovations to deliver smarter, cleaner and safer customer solutions, which we believe will drive significant value for our shareholders.”

GUIDANCE:

Woodward sees FY2020 EPS of $5.22-$5.52, versus the consensus of $5.45. Woodward sees FY2020 revenue of $2.9-3 billion, versus the consensus of $3.03 billion.

Fiscal Year 2020 Outlook

Our previously stated outlook has been updated to reflect the expected impacts of the 737 MAX, weaker oil and gas sales, the sale of the renewables portfolio, the lower tax rate and higher outstanding share count. Any potential impact from the coronavirus is unknown at this time and therefore not reflected in our outlook.

Total net sales for fiscal 2020 are now expected to be between $2.9 and $3.0 billion.

Aerospace sales are now anticipated to be up low single digits compared to the prior year, and Aerospace segment earnings as a percent of segment net sales are still expected to be approximately 21 percent.

Taking into account the impact of the sale of the renewables portfolio, which is expected to close in our third quarter, Industrial sales are now expected to be approximately flat compared to the prior year. Industrial segment earnings as a percent of segment net sales are expected to be approximately 14 percent, which reflects the benefit from the sale of the renewables portfolio being offset by weaker than anticipated oil and gas sales for the full year.

The adjusted effective tax rate is now expected to be approximately 20 percent.

Adjusted free cash flow is expected to be approximately $420 million.

Adjusted earnings per share, which excludes the impacts of the gain on the sale of the Duarte real property and the financial impacts of the sale of the renewables portfolio, is now expected to be between $5.22 and $5.52 based on approximately 65 million of fully diluted weighted average shares outstanding. As a result of the merger agreement with Hexcel, we will not be repurchasing as many shares in the fiscal year as originally planned in our outlook for fiscal 2020. However, within the 18 months following the close of the merger, we anticipate repurchasing approximately $1.5 billion of Woodward Hexcel stock, or approximately 10 percent of the anticipated market capitalization of the combined entity.

For earnings history and earnings-related data on Woodward (WWD) click here.