CURTISS WRIGHT CORP Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Pivot to Growth Strategy: Embracing the strategy has yielded better-than-expected growth and efficiency. Enhanced customer engagement and leveraged domain expertise in mission-critical technologies.
• First Quarter 2025 Results: Sales $806M (+13% YOY), operating income up 34%, diluted EPS up 42%, new orders $1B+ (book-to-bill 1.26), backlog over $3.6B. Strong demand in A&D markets, including naval nuclear propulsion and commercial aerospace avionics.
• Full Year Guidance: Raised overall outlook with sales expected to grow 8-9%, operating margin 18.3-18.5% (80-100 basis points expansion), diluted EPS 14-17% growth, free cash flow $495-515M.

Segment Performance

• Aerospace & Industrial: Overall sales increased 4%, slightly ahead of expectations. Operating income grew 15% with 140 basis points of margin expansion. Driven by defense markets (actuation equipment for F-35, F-18, and Ground Defense) and commercial aerospace (OEM sales growth), offset by modest decline in industrial vehicle products.
• Defense Electronics: Sales grew 16% due to increased embedded computing equipment for C5ISR programs and higher revenues from helicopter platforms (Blackhawk) and Triton UAV. Record first quarter operating margin of 27.5% driven by favorable absorption and mix shift to higher-margin C5ISR programs.
• Naval & Power: Sales grew 18% led by Naval Defense submarine programs and contributions from Power and Process (including commercial nuclear and subsea pumps). Organic growth in commercial nuclear and SMR development, partially offset by unfavorable mix and investment in customer-funded programs.

Guidance

• Sales: Raised to 8-9% growth, driven by A&D markets and order book strength.
• Operating Margin: Expected to increase 80-100 basis points to 18.3-18.5% due to commercial and operational excellence initiatives.
• EPS: Diluted EPS expected to grow 14-17% based on improved sales and profitability in Defense Electronics.
• Free Cash Flow: Raised to $495-515M, reflecting confidence in full-year outlook.

Risks

• Tariffs: Approximately 20% of business subject to tariffs, but mitigation strategies (pricing, operational actions) in place to limit impact. Around $30M tariff impact expected for remainder of 2025, mostly from China imports.
• Geopolitical/Macroeconomic Uncertainties: Ongoing uncertainties that could affect business, but company positioned to mitigate through agility and operational excellence.

Question and Answer

Q: Pete Skibitski asked about tariff impact, product exposure to China, and sourcing concerns.

A: Lynn Bamford and Chris Farkas responded that a cross-functional team mitigated over $20M of tariff impact through operational and pricing strategies, with sourcing and pricing adjustments to address China-related tariffs.

Q: Pete Skibitski followed up on Commercial Aerospace guide.

A: Chris Farkas and Lynn Bamford explained the increase is due to new cockpit waste recorder solutions for commercial aerospace, with FAA safety mandates driving long-term revenue potential.

Q: Kristine Liwag asked about commercial nuclear support under new administration and shipbuilding impact.

A: Lynn Bamford stated positive support from the administration, with progress in Poland and Bulgaria nuclear projects, and shipbuilding initiatives providing near-term and long-term opportunities.

Q: Myles Walton inquired about Defense Electronics margin performance.

A: Lynn Bamford and Chris Farkas noted conservatism in guidance due to various factors, with commercial and operational excellence driving margin expansion but caution around sequential growth.

Q: Jason Gursky asked about acquisition reform implications.

A: Lynn Bamford stated acquisition reform efforts are positive for Curtiss-Wright, as the company primarily uses firm-fixed price contracts and aligns with commercial buying practices.

Q: Louis DiPalma asked about SMR content partnerships.

A: Lynn Bamford reported progress in partnerships with TerraPower, X-energy, and Rolls-Royce, with development dollars ramping for SMR and advanced reactor projects.

Q: Myles Walton followed up on Westinghouse SMR timelines.

A: Lynn Bamford indicated expectations of construction contracts in 2026, with progress in engineering and procurement agreements.