CURTISS WRIGHT CORP Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Curtiss-Wright delivered strong third quarter performance with sales up 10% to nearly $800M, operating income up 11%, diluted EPS up 17%, and free cash flow $163M. Record order book, especially in Defense Electronics.
• Ramped up share repurchase activity, completing a $100M program in Q3 and on track for at least $150M in 2024. Updated full-year guidance raised for sales, operating income, diluted EPS, and free cash flow.
• Key industry developments in commercial nuclear, including Microsoft, Google, and Amazon investing in commercial nuclear, and partnerships with Westinghouse, X-energy, etc., supporting long-term growth in this market.

Segment Performance

• Aerospace & Industrial: Overall sales increased 4%. Commercial aerospace saw strong OEM sales growth on A320 and wide-body platforms. Defense markets had solid actuation equipment sales, but lower general industrial sales due to off-highway vehicle trends. Profitability was affected by favorable absorption, a small restructuring benefit, and unfavorable mix.
• Defense Electronics: Sales grew 12% driven by strong demand for tactical communications and embedded computing. Operating margin reached 26.5%, up 50 basis points year-over-year to a five-year high. Expect sequential revenue decline in Q4 due to ongoing restructuring.
• Naval & Power: Sales grew 14% due to naval defense and commercial nuclear. Profitability was impacted by timing of development revenues.

Guidance

• Sales expected to grow 7%-9%, operating income 7%-10%, diluted EPS 12%-15%, and free cash flow $430M-$450M.
• Aerospace & Industrial: Sales growth 4%-6%, operating income growth 8%-11%, margin 16.9%-17.1%.
• Defense Electronics: Revenue guidance 9%-11%, operating income growth 13%-15%, margin expansion 70-90 basis points to 24.2%-24.4%.
• Naval & Power: Revenue growth 8%-9%, operating income flat to up 2%.

Risks

• Impact of government continuing resolutions on defense spending. Uncertainties in plant life extensions and restarts in commercial nuclear. Potential changes in tariffs and tax code that could affect business operations.

Question and Answer

Q: Within Defense Electronics, how are you measuring share gain activity?

A: Lynn Bamford mentioned focus on organic growth from leading product offerings and customer satisfaction, with future opportunities for market share gain as the team works to win business from competitors.

Q: Impact of ongoing CR on business?

A: Lynn Bamford stated no significant impact to date, but a longer continuing resolution could affect IR&D funding, which drives revenues.

Q: On SMR partnerships, when might new partnerships be announced?

A: Lynn Bamford suggested formal partnerships could be announced in the next 3-6 months, though timelines are subject to company-specific negotiations.

Q: Thoughts on potential transformational acquisitions?

A: Lynn Bamford indicated Curtiss-Wright remains open to larger acquisitions that meet financial criteria, though careful consideration is given to integration and management bandwidth.