On Tuesday, Deutsche Bank increased its price target on Woodward (NASDAQ: NASDAQ:WWD) to $210 from $200 while retaining a Buy rating on the stock. The adjustment follows the recent $7.5 billion Joint Direct Attack Munition (JDAM) Indefinite Delivery/Indefinite Quantity (ID/IQ) contract awarded to Boeing (NYSE:BA) last Friday.
The bank's analysis suggests that if the Department of Defense issues task orders up to the full value of the contract, Woodward could experience a significant boost in revenue.
According to Deutsche Bank, reaching the maximum value of the JDAM contract could lead Woodward back to its prior peak JDAM production levels, which are approximately four times the current rates. This increase in production could potentially provide Woodward with an additional $125 million in revenue, possibly contributing an extra $0.49 to its earnings per share (EPS), a 12% increase compared to the adjusted 2023 EPS.
The report also outlines several reasons why demand for JDAM could grow, potentially benefiting Woodward. These reasons include an increased need for stockpiling by the United States, greater usage of JDAM in Ukraine, and the possibility of resumed offensive arms sales to Saudi Arabia, as reported by the Financial Times over the weekend. Furthermore, the integration of M-Code anti-jam capabilities in Lot 28 may boost demand among potential customers.
The implications of heightened JDAM demand extend beyond Woodward, potentially impacting Boeing, the prime contractor for the munition. General Dynamics (NYSE:GD) could also see benefits, as its Combat Systems segment produces the MK-80 series bomb bodies that are used with JDAM. The positive outlook for JDAM demand reflects a broader impact on the defense industry and related companies.
InvestingPro Insights
Following Deutsche Bank's optimistic assessment of Woodward's (NASDAQ: WWD) prospects, InvestingPro data provides a quantitative perspective that may further inform investors. With a market capitalization of $11.24 billion and a robust revenue growth of 23.49% in the last twelve months as of Q2 2024, Woodward's financial stature is notable. The company's price-to-earnings (P/E) ratio stands at 29.55, indicating investors are willing to pay a premium for its earnings potential relative to its growth, as evidenced by a low PEG ratio of 0.26 for the same period.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, which aligns with Deutsche Bank's positive outlook. Additionally, Woodward's ability to maintain dividend payments for an impressive 52 consecutive years, with a dividend growth of 13.64% as of Q2 2024, showcases its commitment to shareholder returns. For investors seeking more insights, there are 17 additional InvestingPro Tips available, including analysis on Woodward's debt levels, liquidity, and valuation multiples. To access these tips and more, consider using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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