How did Curtiss-Wright perform in fiscal 2023 relative to its prior-year results?

Reported sales grew 11% to $2.85 billion, with 10% organic growth. Reported operating income rose 14% to $485 million, and reported diluted EPS increased to $9.20 from $7.62. On an adjusted basis, which excludes first-year acquisition accounting costs, the divested German valves business, and pension settlement charges in 2022, EPS was $9.38, up 15%. Operating margin was 17.0% reported and 17.4% adjusted.

What is the company guiding for 2024?

Management expects total sales of $2.960-3.010 billion (up 4-6%), operating income of $514-528 million (up 4-7%), diluted EPS of $10.00-10.30 (up 7-10%), and free cash flow of $415-435 million. Guidance is based on 38.5 million diluted shares and assumes a minimum $50 million of share repurchases. Growth is expected across all A&D and Commercial end markets.

Are there any weak spots in the quarter that investors should watch?

Yes. Q4 2023 new orders fell 4% to $685 million due to defense timing. Q4 reported FCF declined 5% to $270 million because higher taxes offset higher cash earnings. Defense Electronics and Naval & Power segment margins compressed 90 and 100 bps respectively on mix and higher R&D spending, and the China Direct AP1000 program continues to wind down.

What drives the growth outlook, and how exposed is the company to defense spending?

Roughly 67% of 2024 sales are expected from Aerospace & Defense markets. Commercial Aerospace is projected to grow 10-12% on narrowbody and widebody OEM ramp-ups, Aerospace Defense 5-7%, and Naval Defense 3-5% on Columbia-class and Virginia-class submarine and CVN-81 carrier programs. Commercial markets (about 33% of sales) are expected to grow 2-4%, with Power & Process at 3-5% on commercial nuclear and process demand. Because defense is a large share of sales, changes in government spending remain a key risk, as the company itself notes.

Does this 8-K contain new audited financial information or a formal filing of results?

No. The 8-K is furnished under Item 2.02 and the press release (Exhibit 99.1) and webcast presentation (Exhibit 99.2) are provided for informational purposes. Under the filing's terms, they are not deemed filed for purposes of Section 18 of the Exchange Act and are not incorporated by reference into other SEC filings. The financial statements in the release are labeled unaudited, so investors should refer to the Form 10-K for audited results.

CW 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed February 15, 2024. Cited figures are marked; the original filing is the authoritative source.

Curtiss-Wright (NYSE: CW) reported record fiscal 2023 results and issued 2024 guidance calling for continued growth.

Full-year 2023 sales rose 11% to $2.8 billion^a (10% organic), reported operating income grew 14% to $485 million, and reported diluted EPS was $9.20 (adjusted $9.38, up 15%). Orders reached a record $3.1 billion (up 5%, book-to-bill 1.1x) and backlog grew 9% to $2.9 billion, providing visibility into 2024. Free cash flow was $403 million reported and $413 million adjusted, a 114% adjusted FCF conversion.

For 2024, management guides to total sales of $2.960^b-3.010 billion (up 4-6% organic), operating income of $514-528 million (up 4-7%), operating margin of 17.4-17.6%, diluted EPS of $10.00-10.30 (up 7-10%), and FCF of $415-435 million. Management notes that margin expansion is achieved while absorbing roughly 40-50 bps of higher engineering (IR&D) spending, and that the Aerospace & Defense markets (67% of sales) are expected to grow 5-7%, led by Commercial Aerospace at 10-12%. Investors should note that Q4 2023 orders fell 4% to $685 million on defense timing, Q4 FCF declined 5% on higher taxes, and the China Direct AP1000 program is winding down, which is a headwind in Power & Process.

The company ended the year with 1.0x net debt/EBITDA, has committed to at least $50 million^c of share repurchases in 2024, and plans an Investor Day on May 21, 2024. The 8-K furnishes these materials under Item 2.02 and they are not deemed filed under Section 18 of the Exchange Act.

02—Key points

Key Highlights

FY2023 record results: sales of $2.85B (+11%, +10% organic), operating income of $485M (+14%), and diluted EPS of $9.20 (adjusted $9.38, +15%).
Record new orders of $3.1B (+5%) with a 1.1x book-to-bill; backlog of $2.9B, up 9%, supports 2024 visibility.
Adjusted FCF of $413M in FY2023 (114% conversion), driven by working capital reduction; Q4 FCF was $270M with a 221% adjusted conversion.
2024 guidance: sales $2.96-3.01B (+4-6%), EPS $10.00-10.30 (+7-10%), FCF $415-435M, and operating margin of 17.4-17.6% (0-20 bps expansion).
Q4 2023 softness: orders declined 4% to $685M on defense timing, and Q4 reported FCF fell 5% due to higher taxes.
Ongoing headwinds: the China Direct AP1000 program is winding down, and higher IR&D investment is absorbing roughly 40-50 bps of margin in 2024.
Capital allocation: at least $50M of 2024 share repurchases planned, net leverage of 1.0x, and an Investor Day scheduled for May 21, 2024.

03—Questions

Frequently Asked Questions

How did Curtiss-Wright perform in fiscal 2023 relative to its prior-year results?
Reported sales grew 11% to $2.85 billion, with 10% organic growth. Reported operating income rose 14% to $485 million, and reported diluted EPS increased to $9.20 from $7.62. On an adjusted basis, which excludes first-year acquisition accounting costs, the divested German valves business, and pension settlement charges in 2022, EPS was $9.38, up 15%. Operating margin was 17.0% reported and 17.4% adjusted.
What is the company guiding for 2024?
Management expects total sales of $2.960-3.010 billion (up 4-6%), operating income of $514-528 million (up 4-7%), diluted EPS of $10.00-10.30 (up 7-10%), and free cash flow of $415-435 million. Guidance is based on 38.5 million diluted shares and assumes a minimum $50 million of share repurchases. Growth is expected across all A&D and Commercial end markets.
Are there any weak spots in the quarter that investors should watch?
Yes. Q4 2023 new orders fell 4% to $685 million due to defense timing. Q4 reported FCF declined 5% to $270 million because higher taxes offset higher cash earnings. Defense Electronics and Naval & Power segment margins compressed 90 and 100 bps respectively on mix and higher R&D spending, and the China Direct AP1000 program continues to wind down.
What drives the growth outlook, and how exposed is the company to defense spending?
Roughly 67% of 2024 sales are expected from Aerospace & Defense markets. Commercial Aerospace is projected to grow 10-12% on narrowbody and widebody OEM ramp-ups, Aerospace Defense 5-7%, and Naval Defense 3-5% on Columbia-class and Virginia-class submarine and CVN-81 carrier programs. Commercial markets (about 33% of sales) are expected to grow 2-4%, with Power & Process at 3-5% on commercial nuclear and process demand. Because defense is a large share of sales, changes in government spending remain a key risk, as the company itself notes.
Does this 8-K contain new audited financial information or a formal filing of results?
No. The 8-K is furnished under Item 2.02 and the press release (Exhibit 99.1) and webcast presentation (Exhibit 99.2) are provided for informational purposes. Under the filing's terms, they are not deemed filed for purposes of Section 18 of the Exchange Act and are not incorporated by reference into other SEC filings. The financial statements in the release are labeled unaudited, so investors should refer to the Form 10-K for audited results.

04—Continue

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