This might work for you:
sed 's/\S\+/foo/2' file
or perhaps:
sed 's/[^[:space:]][^[:space:]]*/foo/2' file
If WORD1 and WORD3 occur more than once:
echo "WORD1 WORD2 WORD3 BLA BLA WORD1 WORD4 WORD3" |
sed 's/WORD3/\n&/g;s/\(WORD1\)[^\n]*\n/\1 foo /g'
WORD1 foo WORD3 BLA BLA WORD1 foo WORD3