IBD Stocks - high ratings

[OldPro]

WGOV hitting new 52 week highs...

have a boat load that plan to hold for a while:

http://biz.yahoo.com/ibd/080515/newamer.html?.v=1
Old-Line Industrial Firm Discovers Profit Growth In Energy Efficiency
Thursday May 15, 5:48 pm ET
Paula L. Stepankowsky

The quest for clean, efficient energy is one of the hot investment themes of the past few years. Woodward Governor is right in the middle of it.

The Fort Collins, Colo., maker of electrical-power, engine and turbine systems is a key player in hot niches such as wind power and fuel-efficient jet engine production. It also is debuting products in demand as nations set stricter emission standards.

Its customers include the makers of jet engines, industrial equipment and trucks, and the Department of Defense.

While much of industrial America is in the doldrums, Woodward (NasdaqGS:WGOV - News) is posting revenue and profit growth more often seen in high-tech startups than in a company founded in 1870.

Course Changes

It avoided the fate of many other industrial companies by changing course whenever necessary to meet market demand, analysts say. The cheap dollar has helped by stimulating overseas sales, which now make up about half of overall revenue, vs. 42% in 2004.

"The company is extremely well-positioned," said Peter Lisnic, an analyst at R. W. Baird & Co. "It's a very nice defensive story, if you will, from the standpoint 20hat they are really tied to global infrastructure and aerospace."

Fiscal 2008 promises to be another year of strong revenue and earnings growth, a string that started in '04.

In the fiscal second quarter ended March 31, Woodward had net sales of $305.8 million, up 19% from $256.3 million in the year-ago period. Net earnings were $29.7 million, or 43 cents a share, up 48% from 29 cents last year.

Woodward officials weren't available to comment. But Chairman and CEO Thomas Gendron said in the second-quarter earnings statement that the company's success so far this year is due to money invested in past years to broaden Woodward's product and customer base.

"While overall macroeconomic uncertainty continues, our prior investments in geographic and market expansion provide us with a broader base for sales and growth," Gendron said.

The trend prompted Woodward to forecast sales growth of 14% to 16% for the fiscal year ending Sept.30, and earnings per share of $1.61 to $1.66.

If achieved, that would translate into revenue of $1.187 billion to $1.209 billion, compared with revenue of $1.042 billion in 2007, and earnings growth of 15% to 18.5% over the split-adjusted $1.40 a share earned in fiscal 2007. The stock split 2-for-1 on Feb. 15.

Analysts surveyed by First Call estimate that Woodward will earn a mean of $1.67 a share in fiscal 2008.

Fueling growth is global demand for power generation, which makes up for any domestic softening, wrote Tyler Hojo, an analyst for Sidoti & Co., in a recent report.

Hojo noted that in fiscal 2007, power-generation sales made up 40% of revenue; aerospace, 25%; transportation, 18%; defense, 10%; and process industries, 7%.

The fastest-growing segment in Woodward's portfolio continues to be its wind power business, part of its broader electrical power system business.

Wind power, long established in Europe, now is expected to make a significant contribution to the U.S. power supply as the price of oil and other energy sources escalates, analysts say. The U.S. Department of Energy estimates that the wind energy market will expand 30% to 40% a year.

Since its acquisition of German company SEG in late 2006, Woodward has played a growing role in the wind power industry by moving into the power inverter business. Power inverters move electricity generated by wind turbines onto the power grid.

Woodward also is following the trend into India and China.

"As wind moves to those markets, these guys will try to chase it," said Michael Casas, an analyst with Kevin Dann & Partners.

Casas adds that the company will likely exceed its 2008 estimate of $100 million in wind-related revenue.

Wind-related sales boosted the company's total electrical power system sales to $64.9 million in the fiscal second quarter, a 43% increase from the year-ago $45.2 million. In all of 2007, electrical power system sales totaled $181.4 million.

The fuel-efficiency theme carries over into the company's turbine system division, which makes components used in fuel-efficient jet engines.

Woodward's parts are in General Electric's (NYSE:GE - News) GEnx engine, sold to Boeing (NYSE:BA - News) for its 787 and to Airbus for its A350. It also sells parts to United Technologies' (NYSE:UTX - News) Pratt & Whitney unit.

While the domestic airline industry is in turmoil, foreign carriers are in a better position to buy new aircraft. This will steady aircraft orders despite high fuel costs, says William Bremer, an analyst with Maxim Group.

Since Woodward is also in the spare-parts business, it will benefit as domestic airlines upgrade engines, even if they can't buy new aircraft right now, adds Bremer, whose company is seeking banking business from Woodward.

Turbine system sales in the second quarter totaled $147.5 million, an increase of 13% over the $130.8 million generated in the year-ago quarter. In all of 2007, turbine sales totaled $523.8 million.

Engine Systems

On the engine-system front, sales are strong as countries buy industrial engines and steam turbines for infrastructure, with more of them keeping an eye on emission control, says Lisnic, whose firm is also seeking Woodward business.

Woodward is entering new markets, such as Korea, where it has introduced a compressed natural-gas technology for vehicles. Analysts say this technology will likely spread to other Asian countries, including China.

Engine system sales in the second quarter were $125.8 million, a 14% increase from $110 million a year ago.

In all of 2007, engine system sales were $455.2 million.

Because of Woodward's strong second half last year, analyst say it could be challenged to maintain strong year-over-year comparisons if the U.S. economic slowdown trickles overseas.

But analysts believe the company would weather any downturn well, bolstered by a strong cash position.