In a significant corporate development, Woodward Inc. (WWD) has revealed its intention to discontinue its on-highway natural gas truck operations in China by the end of the current fiscal year. This decision is poised to refine the company's Industrial division, allowing for a concentrated effort on key markets and sustainable growth prospects. The announcement came despite a positive outlook from UBS analyst Gavin Parsons, who reaffirmed a 'Buy' rating for Woodward and increased his price target from $345 to $378.
This strategic realignment is the culmination of a prolonged evaluation process for the China-based unit, which, according to the company, has consistently failed to achieve substantial and stable financial outcomes. Woodward explored various options, including full or partial sales, but these efforts did not yield suitable buyers. The prevailing difficult market conditions in China ultimately led to the choice of an orderly shutdown, which will involve closing a small manufacturing facility and making limited reductions in sales, engineering, and product support roles. The company emphasizes that these changes will exclusively affect the China on-highway natural gas truck sector.
Despite the challenges in its Chinese truck unit, Woodward Inc. demonstrated remarkable overall performance in fiscal year 2025, achieving record-breaking sales and earnings. This success was attributed to robust contributions from both its Industrial and Aerospace divisions. While the company's shares saw a minor dip in premarket trading following the news, the strategic move is presented as a measure to enhance future operational efficiency and resource allocation across its core end-markets, including Transportation, Power Generation, and Oil & Gas.
This strategic decision by Woodward Inc. underscores the importance of adaptability and focused resource management in a dynamic global economy. By divesting from underperforming assets and re-prioritizing its efforts, the company is positioning itself for sustained strength and innovation. Such proactive measures, even when challenging in the short term, are essential for long-term growth and market leadership, ensuring that businesses can continue to contribute positively to economic development and technological advancement.