Woodward’s pilot controls sale reshapes aerospace exposure

Woodward (WWD) has agreed to sell its pilot controls product line and related services to Ontic Engineering and Manufacturing, including throttle quadrants, rudder pedals, and passive side sticks produced in Niles, Illinois.

The deal includes customary closing conditions and regulatory approvals, as well as a long term supply agreement that keeps Woodward as the sole supplier of certain electromechanical components, and 9 to 12 months of transition services to support ongoing customer deliveries.

At a share price of $380.28, Woodward has seen a 22.33% year to date share price return and a very large 3 year total shareholder return, although recent 1 week and 1 day share price returns show some cooling in momentum.

If this portfolio reshaping has you thinking about where else capital goods demand and electrification could create opportunities, it is worth checking out 33 power grid technology and infrastructure stocks

With Woodward’s shares up 22.33% year to date and trading at $380.28 against an average analyst target of $431.00, the key question is whether there is still an opportunity for investors or if the market is already pricing in future growth.

Most Popular Narrative: 9.7% Undervalued

Analysts currently see Woodward’s fair value at about $421, which sits above the recent $380.28 share price and places the latest product reshaping in the context of longer term expectations.

The global push for decarbonization and rising energy efficiency standards is accelerating demand for high tech propulsion, actuation, and energy management systems in both aviation and industrial markets, supporting Woodward's revenue growth and expanding its addressable market over the coming years.

Read the complete narrative. Read the complete narrative.

Want to see what is baked into that valuation gap? The narrative focuses on compounded revenue growth, firmer margins, and a premium future earnings multiple. The exact mix of those assumptions is where the story becomes more detailed.

Result: Fair Value of $421 (UNDERVALUED)

However, heavy capital spending on new facilities, along with any stumble in integrating acquisitions, could squeeze free cash flow and challenge the higher margin assumptions behind that upside story.

Another way to look at Woodward’s valuation

The analyst narrative points to a fair value of about $421, yet our DCF model estimates future cash flows at $297.76 per share, which is below the current $380.28 price. That gap frames Woodward as overvalued on this method, so which view do you trust more?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Woodward for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 58 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Given the mixed signals in the article, it makes sense to look directly at the numbers and assumptions yourself and consider your options before sentiment changes again. To see what investors are optimistic about in the current setup, take a closer look at the 2 key rewards

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.