Why did Curtiss-Wright raise its full-year 2024 guidance?

Management cited strong first-half results and a favorable outlook for the rest of 2024, especially in A&D markets. The raise covered sales growth (now 6%–8%), operating income growth (now 6%–9%), diluted EPS ($10.40–$10.65), and free cash flow ($425M–$445M). The raised tax-rate assumption and the U.K. entity consolidation also contributed to the EPS increase.

What is driving growth in the Aerospace & Defense business?

A&D sales rose 16% in Q2, principally from defense electronics (embedded computing and tactical communications), naval defense (submarine programs and the CVN-81 aircraft carrier), and higher commercial aerospace OEM sales on narrowbody and widebody platforms. The company also cited higher arresting-systems equipment sales.

Are there any weak spots in the quarter?

Yes. Naval & Power adjusted operating margin fell 320 bps to 14.4% due to unfavorable product mix and the timing of development programs, and adjusted operating income there declined 6%. General Industrial sales dropped 3%, reflecting lower sales of industrial vehicle products. Guidance for General Industrial was lowered to flat from a prior range of 1%–3%.

What is the Ultra Energy acquisition and why does it matter?

Curtiss-Wright agreed to acquire Ultra Nuclear Limited and Weed Instrument Co. for $200M in cash. The business makes safety-critical monitoring systems, sensors, and reactor protection and control systems, mainly for commercial nuclear and A&D customers. It is expected to be accretive to adjusted EPS in its first full year, generate free cash flow conversion above 100%, and close in Q3 2024 pending U.K. regulatory approval. Management cites roughly 2023 sales of about $65M and a purchase multiple below 12x EBITDA.

Are the reported results GAAP or adjusted, and how should investors read them?

Both are presented. Reported figures follow GAAP, while adjusted figures exclude first-year purchase accounting costs and 2024 restructuring costs. In Q2 2024, reported operating income was $129M (16.4% margin) versus $133M adjusted (17.0%). Reported diluted EPS was $2.58 versus $2.67 adjusted, with the $0.09 difference attributable to restructuring costs. Investors should review both, as the company notes that non-GAAP measures may not be comparable to those of other companies.

CW 8-K: Earnings & Results

01—Abstract

Summary

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

Curtiss-Wright (NYSE: CW) reported strong second-quarter 2024 results on August 7, 2024, with reported sales up 11% to $785 million^a, adjusted operating income up 16% to $133 million, and adjusted diluted EPS up 24% to $2.67.

Growth was led by the Aerospace & Defense markets, which rose 16% on strong demand in defense electronics, naval defense (submarines and the CVN-81 carrier), and commercial aerospace OEM production. New orders reached $995 million^b, up 18%, for a book-to-bill of roughly 1.3x, and backlog hit a record $3.2 billion, up 13% year-to-date. Management raised full-year 2024 adjusted guidance across the board.

Sales growth moved to 6% to 8%, adjusted operating income growth to 6% to 9%, diluted EPS to $10.40 to $10.65^c (up 11% to 14%), and free cash flow to $425 million to $445 million. The operating margin range of 17.4% to 17.6% was maintained. The effective tax rate was reduced by 100 bps to 22.5% following a U.K. legal entity consolidation.

The company also launched a 2024 restructuring program, expected to cost about $15 million^d in 2024 and deliver roughly $10 million in annualized savings in 2025, and announced the $200 million cash acquisition of Ultra Energy, expected to close in Q3 2024. Investors should note that margin in Naval & Power declined 320 bps on an adjusted basis due to product mix and development program timing, and that General Industrial sales fell 3%. Most results are on an adjusted (non-GAAP) basis, and the 8-K was furnished rather than filed.

02—Key points

Key Highlights

Reported sales of $785M, up 11%; Aerospace & Defense markets up 16%, led by Naval Defense (+16%) and Aerospace Defense (+17%)
Adjusted operating margin of 17.0%, up 60 bps; adjusted diluted EPS of $2.67, up 24% year over year
New orders of $995M, up 18%, yielding a ~1.3x book-to-bill; record backlog of $3.2B, up 13% YTD
Full-year 2024 guidance raised: sales growth to 6%–8%, diluted EPS to $10.40–$10.65, and FCF to $425M–$445M; operating margin held at 17.4%–17.6%
Q2 free cash flow of $100M with 97% adjusted FCF conversion; management reiterates FCF conversion above 105% for the year
2024 restructuring program (~$15M cost) and U.K. entity consolidation (100 bps tax rate reduction) expected to yield ~$10M and ~$5M annualized savings, respectively
Pending $200M cash acquisition of Ultra Energy (nuclear monitoring and reactor protection systems), expected to close in Q3 2024 and be accretive to adjusted EPS in year one

03—Questions

Frequently Asked Questions

Why did Curtiss-Wright raise its full-year 2024 guidance?
Management cited strong first-half results and a favorable outlook for the rest of 2024, especially in A&D markets. The raise covered sales growth (now 6%–8%), operating income growth (now 6%–9%), diluted EPS ($10.40–$10.65), and free cash flow ($425M–$445M). The raised tax-rate assumption and the U.K. entity consolidation also contributed to the EPS increase.
What is driving growth in the Aerospace & Defense business?
A&D sales rose 16% in Q2, principally from defense electronics (embedded computing and tactical communications), naval defense (submarine programs and the CVN-81 aircraft carrier), and higher commercial aerospace OEM sales on narrowbody and widebody platforms. The company also cited higher arresting-systems equipment sales.
Are there any weak spots in the quarter?
Yes. Naval & Power adjusted operating margin fell 320 bps to 14.4% due to unfavorable product mix and the timing of development programs, and adjusted operating income there declined 6%. General Industrial sales dropped 3%, reflecting lower sales of industrial vehicle products. Guidance for General Industrial was lowered to flat from a prior range of 1%–3%.
What is the Ultra Energy acquisition and why does it matter?
Curtiss-Wright agreed to acquire Ultra Nuclear Limited and Weed Instrument Co. for $200M in cash. The business makes safety-critical monitoring systems, sensors, and reactor protection and control systems, mainly for commercial nuclear and A&D customers. It is expected to be accretive to adjusted EPS in its first full year, generate free cash flow conversion above 100%, and close in Q3 2024 pending U.K. regulatory approval. Management cites roughly 2023 sales of about $65M and a purchase multiple below 12x EBITDA.
Are the reported results GAAP or adjusted, and how should investors read them?
Both are presented. Reported figures follow GAAP, while adjusted figures exclude first-year purchase accounting costs and 2024 restructuring costs. In Q2 2024, reported operating income was $129M (16.4% margin) versus $133M adjusted (17.0%). Reported diluted EPS was $2.58 versus $2.67 adjusted, with the $0.09 difference attributable to restructuring costs. Investors should review both, as the company notes that non-GAAP measures may not be comparable to those of other companies.

04—Continue

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