Truist Securities has revised its rating on Woodward (NASDAQ: NASDAQ:WWD), shifting from a "Hold" to a "Buy" stance, and increased the price target to $187 from the previous $152. This adjustment anticipates a 20% upside from the stock's current levels.
The reassessment comes after a period of caution from the firm regarding Woodward's stock performance, which was previously thought to be driven by non-sustainable revenues from China's on-highway natural gas engine sales.
The view was confirmed following Woodward's third-quarter fiscal year 2024 results and the subsequent downgrade of the industrial outlook. With the China natural gas engine sales now excluded from both management and market expectations, and considering the recent decline in Woodward's stock price, Truist Securities believes it is an opportune time to change its position on the stock.
Woodward is seen as an attractive investment to capitalize on the expected increase in narrow-body aircraft production. Additionally, the company's defense original equipment manufacturer (OEM) revenues are expected to experience growth after five years of negative compound annual growth rate (CAGR).
The firm anticipates the potential for margin expansion in both the aerospace and defense segments, driven by ongoing pricing, productivity, and operational improvements.
In other recent news, UBS maintained its Buy rating on Woodward, keeping the stock target steady based on consensus estimates. However, the firm noted ongoing discussions about Woodward's Industrial segment's revenue and earnings, particularly regarding the China Truck versus Core Industrial markets.
On the other hand, TD (TSX:TD) Cowen maintained its Buy rating on Woodward but reduced the price target due to anticipated challenges in the aerospace original equipment sector and China's natural gas bus and truck engine market. Both UBS and TD Cowen's analysis indicate a cautious outlook for Woodward's future guidance.
InvestingPro Insights
Following Truist Securities' upgrade of Woodward (NASDAQ:WWD) to a "Buy" rating, investors are considering the company's current financial health and future prospects. According to InvestingPro data, Woodward boasts a market capitalization of $9.17 billion and has shown a robust revenue growth of 16.9% over the last twelve months as of Q3 2024. This growth is a testament to the company's strong performance despite previous concerns over the sustainability of certain revenue streams.
One of the InvestingPro Tips highlights that Woodward has maintained dividend payments for an impressive 52 consecutive years, indicating a consistent return to shareholders. Additionally, the company's stock is trading at a low P/E ratio relative to near-term earnings growth, suggesting potential value for investors considering the stock's earnings potential. With a P/E ratio of 24.97, and an adjusted P/E ratio of 23.02 for the last twelve months as of Q3 2024, the company's valuation metrics appear attractive, especially when paired with its recent revenue and earnings growth.
For those interested in a deeper analysis, InvestingPro offers additional insights, with numerous tips available to help investors make informed decisions. As Woodward prepares for its next earnings date on November 14, 2024, these InvestingPro Tips could provide valuable context for the company's financial trajectory.
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