Jefferies Says Woodward's Fiscal 2015 Is Another Transition Year, Downgrades To Hold

In a report published Tuesday, Jefferies analyst Sheila Kahyaoglu downgraded shares of

to Hold from Buy with a price target lowered to $52 from a previous $59 based on a lack of near-term catalysts. According to Kahyaoglu, Woodward has seen "robust" market growth in its energy sector in 2014 due to a pull forward in demand driven by a change in emission standards; however, volumes are expected to decline in 2015. Moreover, the company's exposure to oil and gas over the short term may create some additional headwinds, although the direct exposure to oil extraction is fairly small. Kahyaoglu said Woodward's revenue growth in Aerospace is only expected to grow in fiscal 2017 and into fiscal 2018 as the narrowbody platforms take time to ramp. The analyst added that next gen narrowbody platforms will only have a "meaningful impact" in fiscal 2018 based on an estimated 380 A320neos and 737MAXs deliveries in 2017. Finally, Kahyaoglu stated that the company has invested in automation and building greenfield sites. Once these facilities are online, the company should capture the benefit of higher volume leverage but this is not expected until fiscal 2017/2018.