Earnings Call: Curtiss-Wright Sees Strong Q3 and Upgrades 2024 Outlook

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Earnings Call: Curtiss-Wright Sees Strong Q3 and Upgrades 2024 Outlook

Curtiss-Wright Corporation (CW), a diversified global provider of technologically advanced products and services that require high engineering, reported strong financial results for the third quarter of 2024. The company's sales reached approximately $800 million, reflecting a 10% year-over-year increase, driven by significant growth in the Defense Electronics and Naval & Power segments. The Aerospace & Defense markets experienced a 15% sales increase, while the commercial nuclear sector showed low double-digit growth. Operating income and margins improved, diluted earnings per share rose by 17%, and free cash flow increased by 19%. The order backlog grew by 2%, reaching a record $3.3 billion, supporting a long-term positive outlook. Curtiss-Wright raised its full-year 2024 guidance, expecting a sales growth of 7% to 9% and diluted earnings per share growth of 12% to 15%.

Key Points:

  • Curtiss-Wright reported approximately $800 million in sales for Q3 2024, up 10%.
  • Operating income increased by 11%, and margins expanded to 18.7%.
  • Diluted earnings per share rose by 17%, and free cash flow reached $163 million, reflecting a 19% improvement.
  • The order backlog grew by 2% year-over-year, reaching $3.3 billion.
  • The full-year 2024 guidance has been raised, with sales growth expected to be 7% to 9% and diluted earnings per share growth of 12% to 15%.
  • The company plans to close the Ultra Energy acquisition in Q4 and has completed a $100 million share buyback.
  • Long-term growth is supported by investments in technology and talent, targeting a CAGR of over 5% by 2026.

Company Outlook:

  • Aerospace & Defense sales growth is projected at 10% to 12% for 2024.
  • The full-year outlook for Commercial Aviation has been elevated to 16% to 18%.
  • Sales growth in the Power and Process market is set at 5% to 7%.
  • The general industrial market outlook has been revised down to a decrease of 2% to 4%.
  • Total sales growth in commercial markets is expected to be 1% to 3%.
  • Diluted earnings per share is projected to be between $10.55 and $10.75, with free cash flow expected between $430 million and $450 million.

Negative Highlights:

  • Sequential decline in marine defense revenues is anticipated due to timing issues in Q4.
  • The general industrial market outlook has been revised down due to lower off-highway vehicle sales.
  • The Defense Electronics segment is expected to see declines in revenue and margins in Q4.
  • A $3 million impact is expected in the A&I segment due to restructuring in Q4.

Positive Highlights:

  • Strong demand in tactical communications and marine defense supports growth.
  • Increased OEM production sales bolster Commercial Aviation.
  • Ongoing success in winning new business, particularly in the commercial nuclear sector.
  • Positive momentum is expected to continue in the commercial nuclear market.
  • Amazon's plan for a 5-gigawatt power deployment could generate significant revenue through a partnership with X-energy.

Challenges:

  • Despite strong growth, the company anticipates some challenges, including a slight year-over-year increase in IR&D investments and the impacts of restructuring efforts.

Q&A Highlights:

  • Discussions with Westinghouse regarding AP1000 reactors are ongoing, with a focus on Eastern European markets.
  • Bipartisan support for defense spending and nuclear leadership in the U.S. remains strong.
  • There is potential for new SMR partnerships and larger acquisitions, with a cautious approach to ensure proper integration.
  • The next company update is planned for February with full-year results.

Curtiss-Wright's third-quarter performance reflects its strong market position and the readiness of strategic investments and partnerships to support future growth. The company’s elevated guidance and robust backlog underline confidence in sustainable profitability. Management’s focus on operational efficiency and strategic acquisitions, such as the upcoming Ultra Energy deal, signals a proactive approach to capitalize on emerging opportunities, particularly in the commercial nuclear and defense sectors.

InvestingPro Forecasts: Curtiss-Wright’s strong financial performance in Q3 2024 is further supported by data from InvestingPro. The company's market capitalization stands at $13.29 billion, reflecting its significant presence in the aerospace and defense sector.

One of the most notable InvestingPro insights is that Curtiss-Wright has impressively maintained dividend payments for 51 consecutive years, demonstrating its long-term commitment to shareholder returns. This aligns with the strong financial results and positive outlook reported in the article.

The company’s P/E ratio of 33.77 indicates that investors are willing to pay a premium for Curtiss-Wright shares, likely due to the company’s strong growth expectations and market position. This is consistent with the upgraded full-year guidance and record backlog mentioned in the article.

InvestingPro data shows a 9.42% revenue growth over the past twelve months, closely matching the reported 10% sales increase for Q3 2024. Additionally, an operating income margin of 18.48% is consistent with the expanding margins discussed in the earnings report.

A year-over-year total return of 74.06% reflects investors' confidence in Curtiss-Wright’s performance and future prospects. This significant return is associated with the company's strong financial results and positive outlook outlined in the article.

For readers seeking a deeper analysis, InvestingPro offers 16 additional insights for Curtiss-Wright, providing a comprehensive perspective on the company’s financial health and market position.