Woodward's Q2 2025 Earnings Call: Key Contradictions on Aftermarket Growth, Supply Chains, and Margin Guidance

Commercial aftermarket growth expectations, defense aftermarket stability, supply chain performance and Boeing production rate, defense OE and aftermarket growth expectations, aerospace segment margin guidance are the key contradictions discussed in Woodward's latest 2025Q2 earnings call.



Strong Overall Financial Performance:
- Woodward's net sales increased by 6% year-over-year to $884 million for Q2 2025, with adjusted earnings per share up 4%.
- This growth was driven by steady performance across industries, despite headwinds from China on-highway volume and mix.

Commercial Aftermarket Growth:
- Commercial aftermarket sales rose by 23% in the quarter due to both price and higher volume.
- The spike in aftermarket growth was attributed to quicker-than-expected shipments of spare parts to MRO facilities and increased volume in multiple ways Woodward serves customers.

Aerospace Segment Performance:
- Aerospace segment sales increased to $562 million, up 13% year-over-year, with defense OEM sales surging 52%.
- This growth was primarily due to increased demand for smart defense programs and strong performance in defense OEM sales.

Lean Transformation Impact:
- The lean transformation in aerospace plants led to record sales at certain facilities, including the Rockford complex and Zealand plant.
- This improvement is attributed to accelerated onboarding of new frontline members and model line transformations reaching new performance levels.

Industrial Segment and China On-Highway Impact:
- Industrial segment sales decreased by 5% due to a 18% decline in China on-highway sales, which were $21 million in Q2, down from $66 million in the prior year.
- The downturn in China on-highway sales was driven by subdued demand and a slow recovery in that market.