Woodward’s Tale of Two Divisions: Aerospace Soars as Industrial Struggles

The technology company Woodward presents a compelling study in corporate contrasts. While one major business division achieves unprecedented performance, another faces significant headwinds. This divergence creates a complex but intriguing investment profile, raising the question of whether the company's strengths can sufficiently counterbalance its weaknesses.

Woodward's industrial segment encountered substantial difficulties in the latest reporting period. Revenue declined by 3% to $319 million, with profits contracting sharply by 20%. The division's margin performance deteriorated significantly, falling 320 basis points to a modest 14.9%.

The primary driver of this downturn stems from the collapse of Woodward's China On-Highway business, which plummeted by a substantial 69%. Demand for heavy commercial vehicles in the Chinese market has reached unprecedented lows. Despite this setback, Woodward's core industrial operations excluding the China contraction demonstrated resilience, posting a 9% revenue increase.

Aerospace Business Reaches New Heights

In stark contrast to its industrial counterpart, Woodward's aerospace division is experiencing extraordinary growth. The segment achieved record sales of $596 million during the third quarter of 2025, representing a 15% year-over-year advancement.

The defense sector within aerospace showed particularly explosive expansion, surging 56%, while commercial services grew by an impressive 30%. Margin improvement in aviation reached 140 basis points, climbing to 21.1%. The company secured a strategic victory with its selection as supplier for spoiler control actuators on the Airbus A350, underscoring Woodward's technological leadership in primary flight control systems.

Should investors sell immediately? Or is it worth buying Woodward?

Strategic Initiatives and Revised Outlook

Management has responded to market conditions with targeted acquisitions, including the July 2025 purchase of Safran's North American electromechanical actuators business. This strategic move strengthens Woodward's portfolio for wide-body aircraft and next-generation aviation platforms.

Given the robust performance in aerospace, Woodward's leadership has substantially raised its full-year 2025 guidance:
- Total revenue projection: $3.45 to $3.525 billion
- Adjusted earnings per share: $6.50 to $6.75
- Aerospace growth forecast: 11% to 13%
- Industrial revenue expectation: Decline of 5% to 7%

Market Perspective and Stock Performance

Despite the mixed operational results, market analysts express confidence in Woodward's prospects. Wolfe Research upgraded the shares to "Outperform" in October 2025, establishing a $300 price target that suggests upside potential exceeding 30% from current levels.

The equity currently trades just below its 52-week peak, having advanced nearly 60% since the April low. The critical question remains whether Woodward can effectively mitigate industrial segment weaknesses while fully capitalizing on aerospace strengths. The upcoming quarterly report in mid-November may provide crucial insight into this balancing act.