This Aerospace Stock Tests Support Amid Iran War, Eyes Fresh Entry Amid 18% Run

With the U.S. currently engaged in a war with Iran, defense plays are back in focus. Aerospace stock Woodward (WWD) is one to consider as it tests support at a key level and constructs a fresh base.

The Colorado-based company makes energy control systems and components for aircraft and industrial engines and turbines. Notably, the contractor works in both commercial and military spaces.

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In the defense space, its products include engine controls and flight control actuation for the F-35 Lightning II and the F/A-18 Super Hornet fighter jets. The former aircraft is engaging in action during the ongoing war in the Middle East with the U.S. and Israel in conflict with Iran.

Woodward is also an important player in commercial aviation due to its partnerships with Boeing (BA) and Airbus (EADSY). Woodward provides these companies with fuel metering units, spoiler actuation systems and sensors.

The company has been more active on the acquisition front of late as it chases growth. It snapped up Safran Electromechanical Actuation last July and recently moved to acquire Valve Research & Manufacturing.

Woodward stock is sturdy from a fundamental and technical perspective, which is reflected in its best-possible IBD Composite Rating of 99.

It ranks among the top 6% of equities in terms of price gains over the past 12 months. Since the start of the year alone, it has jumped about 18%. In contrast, the benchmark S&P 500 has fallen by more than 4%.

Crucially, its gains are underpinned by the company’s hardy profitability. The aerospace stock holds an Earnings Per Share Rating of 98 out of 99. Its earnings have grown by an average 39% over the past three quarters. This is well in excess of the 25% growth sought by The IBD Methodology investors.

In addition, its profit has accelerated for the past four quarters, a bullish sign. It posted a year-over-year per-share earnings leap of 180% in the most recent period.

Woodward Stock Analysis

Shares have built a flat base with an ideal buy point of 403.31, MarketSurge analysis shows. This is a midstage pattern for the stock. A slightly lower alternate entry of 403 is also in play.

Woodward stock is currently testing buying support at its 50-day moving line, an important technical benchmark. Rebounding from here and recapturing its 21-day exponential moving average are short-term objectives.

The stock’s relative strength line is bending higher again after a lull during its base-building period. A sharp upward thrust would help drive a breakout.

Big Money has been adding to Woodward stock holdings of late. This is reflected in its Accumulation/Distribution Rating of B-.

In total, 48% of shares are held by funds. The highly rated Lord Abbett Developing Growth Fund (LAGWX) is among its noteworthy backers.

Analysts Bullish On Aerospace Stock

Wall Street is currently backing shares for further gains. Woodward stock has a consensus rating of strong buy with an average price target of 411.50, according to TipRanks.

Jefferies analyst Sheila Kahyaoglu is even more bullish, rating the aerospace stock as a buy with a 450 target. She flagged the firm’s move to acquire Valve Research & Manufacturing, which is set to close in the first half of this year, which she believes could add $45 million in sales per year.

“VRM is a Florida-based manufacturer of high-precision flow control valves for aerospace and defense applications with 130 employees,” she said in a March 9 note to clients. “The business includes electromagnetic valve solutions, such as solenoid valves, check valves, and relief valves used in engines, complementing WWD’s servo valve offerings.”

This is only the company’s second acquisition since 2018. It is expected to help the firm win business for new platforms such as Airbus’ next-generation single-aisle aircraft, which are set to take to the skies in the second half of the 2030s. The firm broke its long dry streak by snapping up Safran Electromechanical Actuation last July.

Aftermarket Growth Set To Continue

UBS analyst Gavin Parsons is also upbeat, rating the stock as a buy with a 417 target. He said the company is “diversified across large and small commercial and military aircraft, as well as guided munitions and other defense applications.” He thinks the firm will continue to benefit from “peer-best” aftermarket provisioning sales.

“It may be lumpy, but we are confident in continued peer-best aftermarket growth,” Parsons said in a Feb. 5 research note. The analyst also said sales here can be lumpy quarter to quarter “as spare part pools are stockpiled by customers for specific platforms and/or flight routes.”

Please follow Michael Larkin on X at @IBD_MLarkin for more analysis of growth stocks.

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