Why Woodward Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of aerospace and energy components supplier Woodward (NAS: WWD) sank as low as 16% on Monday after the company cut its current-quarter and full-year guidance.

So what: The disappointing third-quarter outlook (EPS of $0.40 versus the consensus of $0.60) coupled with a lower full-year forecast reinforces fears over weakness in parts of the commercial aerospace aftermarket. While Woodward also announced a 10-year deal with Caterpillar (NYS: CAT) to supply diesel-fuel-injection systems, it wasn't enough to appease investor concerns regarding spiking product development costs and lower sales volumes.

Now what: Management now sees full-year EPS of $1.90 on revenue of $1.85 billion to $1.9 billion, down from its prior view of $2.00 and $1.85 billion to $1.95 billion, respectively. "While our markets may continue to be less predictable quarter-to-quarter as macroeconomic trends unfold, we expect our proven competitive strengths, including industry-advancing innovation and collaborative relationships with leading customers, will continue to serve us well," Chairman and CEO Thomas Gendron reassured investors. With the stock now off about 30% from its 52-week high and trading at a cheapish forward P/E of 12, betting on that long-term bullishness might not be such a bad idea.

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The article Why Woodward Shares Plunged originally appeared on Fool.com.

Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. Try any of our Foolish newsletter servicesfree for 30 days.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Fool'sdisclosure policyalways gets a perfect score.

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