Woodward Builds Power Behind the Scenes

Editor's note: This was originally published on RealMoney. It's being republished as a bonus for TheStreet.com readers.

Woodward GovernorWGOV posted another stellar quarter last night [Jul. 21]. And with the palpable tension out there today in the form of AppleAAPL , Texas InstrumentsTXN and American ExpressAXP, it's important to balance the negativity and note the positive reports hitting the wire.

Woodward Governor earned 47 cents a share in its fiscal third quarter and beat consensus estimates of 43 cents (a 9.3% upside beat). Sales grew rose 23% year over year to $329 million, vs. the $308 million consensus (a 6.8% upside beat).

Even better, management issued upside guidance for fiscal 2008. It now sees revenue growth of roughly 20%, up from 14% to 16%, and $1.75 in earnings, up from the previous guidance of $1.61 to $1.66.

I continue to view "The Governor" in a noncyclical fashion; the company is not reliant on the fickle U.S. economy for growth. Woodward is a global secular story. The company's business is divided into three segments: turbine systems, engine systems and electrical power systems. It is a front-and-center supplier to the drive for more efficient and cleaner energy systems.

On yesterday's conference call, Tom Gendron, president and CEO, discussed industrial turbine demand, saying, "Emission regulations, growing global energy demands and newer projects such as coal gasification all should provide opportunities for Woodward."

Favorable Winds

Also, Woodward Governor is a stealth play on wind power. In October 2006, it acquired SEG, a German designer and manufacturer of wind power generation products. Although the wind business is still a small fraction of overall revenue, it is growing rapidly. The company has guided to slightly higher than $100 million in revenue for the year (about 9% of total revenue).

Gendron says, "Demand for wind turbines continues to grow at a remarkable rate." The CFO adds, "Again this quarter, wind power sales were very strong."

Cramer: Give Your Portfolio Wind Power (Video):

Jim Cramer reviews his "wind-ex" stocks.

To watch the video, click the player below: