CURTISS WRIGHT CORP Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Second Quarter Results: Sales of $877 million, up 12% YOY with 9% organic growth. Operating income up 20% YOY, diluted EPS up 21% YOY. Free cash flow $117 million, up 17% YOY. New orders $1 billion, book-to-bill >1.1x. Backlog up 12% YTD to over $3.8 billion.
• Capital Allocation: Board approved $400 million increase in share repurchase authorization and 14% increase in quarterly dividend.
• Growth Strategies: Pivot to Growth strategy driving strong results. Opportunities in defense (global defense spending acceleration) and commercial nuclear (global resurgence in demand, Westinghouse AP1000 reactors, small modular reactors).

Segment Performance

• Aerospace & Industrial: Overall sales increased 3%, operating income grew 5% and operating margin expanded 40 basis points.
• Defense Electronics: Sales rose 11%, with an operating margin of 26.8% which was up 110 basis points.
• Naval and Power: Sales grew 19% driven by higher naval defense revenues and the Ultra Energy acquisition. Revenue contribution details were not explicitly broken down by percentage in the summary but the absolute figures and segment-specific performances are as stated.

Guidance

• Sales: Expected to increase 9%-10%.
• Adjusted Diluted EPS: Range $12.70-$13, up 16%-19% YOY.
• Free Cash Flow: Ranges from $520 million to $535 million, up 8%-11% YOY with ~108% conversion rate.
• Segment Guidance: Aerospace & Industrial revenue 4%-5%, Defense Electronics sales 9%-11%, Naval and Power sales 12%-13%.

Risks

• Tariff impacts on financial performance.
• Challenges related to ERP implementation in Defense Electronics segment consuming management attention.

Question and Answer

Q: Scott Deuschle from Deutsche Bank asked about growth acceleration in commercial aerospace.

A: K. Christopher Farkas noted conservative positioning at start of year, positive signals from customers despite mixed platform performance, expecting clarity in second half.

Q: Peter Arment from Baird inquired about Defense Electronics margin sustainability.

A: K. Christopher Farkas mentioned restructuring for growth, operational excellence efforts, but caution due to ERP implementation and IR&D ramp.

Q: Myles Walton from Wolfe Research asked about M&A pipeline.

A: Lynn Bamford stated pipeline not empty, Board increased share repurchase authorization, Chris Farkas emphasized share buyback as effective capital return method.

Q: Michael Louie DiPalma from William Blair asked about AP1000 reactor opportunity.

A: Lynn Bamford confirmed significant opportunity for Curtiss-Wright as supplier to Westinghouse, but cautious about over-specifying content.

Q: Nathan Jones from Stifel asked about R&D investments.

A: Lynn Bamford mentioned investments in nuclear capacity, flight data recorder ramp, subsea area, and general R&D across businesses.