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CURTISS WRIGHT CORP (CW)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered double‑digit top-line growth and broad margin expansion: revenue $876.6M (+12% y/y), adjusted operating margin 18.3% (+130 bps), and adjusted EPS $3.23 (+21% y/y) . Consensus was exceeded on revenue, EPS, and EBITDA (see Estimates Context)*
  • Guidance raised across the board: sales growth to 9–10%, operating income +15–18%, operating margin 18.5–18.7%, EPS to $12.70–$13.00, and FCF to $520–$535M .
  • Demand remained strong: new orders $1.0B (>1.1x book‑to‑bill), backlog $3.9B (+12% YTD), and FCF $117M (+17% y/y) .
  • Key catalysts: accelerating Flight Data Recorder retrofit programs with Honeywell, robust NATO and allied defense demand, strong naval programs (Columbia, Virginia), and commercial nuclear partnerships (e.g., Rolls‑Royce SMR) .

What Went Well and What Went Wrong

  • What Went Well
    • “We are successfully executing our Pivot to Growth strategy and building strong momentum to compound sustained profitable growth.” — Lynn M. Bamford, CEO .
    • Defense Electronics margins expanded to 26.8% on favorable absorption and operational excellence; segment sales +11% y/y .
    • Naval & Power sales +19% y/y with adjusted margin +210 bps to 16.5%, driven by Columbia-class timing and commercial nuclear strength .
  • What Went Wrong
    • Higher R&D investments and tariff mitigation actions temper margin upside (company expects >$20M gross tariff exposure mitigated to ~$10M net in 2025) .
    • Sequential timing headwinds in Ground Defense (CR and order timing cause Q3 revenue dip before strong Q4) .
    • Capex increased across segments (Q2 capex $19.4M vs $11.1M y/y), modestly offsetting FCF growth .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$784.8 $805.6 $876.6
Diluted EPS (GAAP) ($)$2.58 $2.68 $3.19
Adjusted EPS ($)$2.67 $2.82 $3.23
Operating Income ($USD Millions)$128.9 $129.2 $156.3
Operating Margin (GAAP, %)16.4% 16.0% 17.8%
Adjusted Operating Income ($USD Millions)$133.3 $134.0 $160.0
Adjusted Operating Margin (%)17.0% 16.6% 18.3%

Segment performance (Adjusted unless noted):

SegmentMetricQ2 2024Q2 2025
Aerospace & IndustrialSales ($M)$233.2 $239.1
Operating Income ($M)$37.9 $39.6
Operating Margin (%)16.2% 16.6%
Defense ElectronicsSales ($M)$228.5 $253.0
Operating Income ($M)$58.8 $67.9
Operating Margin (%)25.7% 26.8%
Naval & PowerSales ($M)$323.1 $384.4
Operating Income ($M)$46.6 $63.6
Operating Margin (%)14.4% 16.5%

KPIs and cash flow:

KPIQ2 2024Q2 2025
New Orders ($USD Billions)~1.0 (slight increase y/y) $1.0
Book-to-Bill (x)~1.14x (implied) 1.14x
Backlog ($USD Billions)$3.4 (FY24) $3.9
Net Cash from Ops ($M)$111.3 $136.6
Capex ($M)$11.1 $19.4
Free Cash Flow ($M)$100.3 $117.2
Shares Repurchased—59,501 shares ($21M)
Dividend per Share ($)$0.21 $0.24

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Sales GrowthFY 20258–9% 9–10% Raised
Operating Income GrowthFY 202513–16% 15–18% Raised
Operating Margin (%)FY 202518.3–18.5% 18.5–18.7% Raised
Diluted EPS ($)FY 2025$12.45–$12.80 $12.70–$13.00 Raised
Free Cash Flow ($M)FY 2025$495–$515 $520–$535 Raised
A&D Sales GrowthFY 20257–9% 8–10% Raised
Aerospace DefenseFY 20256–8% 7–9% Raised
Naval DefenseFY 20255–7% 7–9% Raised
General IndustrialFY 2025Flat Flat Maintained
Dividend per Share ($)Q2 2025$0.21 (prior quarter) $0.24 Raised

Earnings Call Themes & Trends

TopicQ4 2024 (prior two quarters context)Q1 2025Q2 2025Trend
AI/technology (NVIDIA Blackwell; tactical edge)Building MOSA and embedded computing leadership; restructuring to grow Defense Electronics Announced NVIDIA OEM program alignment; cockpit voice/data recorder innovation for 25‑hour mandate Mgmt describes GPU/C2 applications at tactical edge; robust demand in UAVs and counter‑UAS Increasing specificity and adoption
Supply chain/tariffsManaged past disruptions; cautious into 2025 Tiger team mitigation; ~$30M gross tariff exposure, ~$10M net expected FY25 guidance explicitly includes potential direct tariff impacts and mitigations Mitigation underway; net impact contained
Flight Data Recorder retrofitOEM demand in commercial aero Raised commercial aero guide driven by FAA/EASA 25‑hour retrofit; Boeing partner; Airbus qualification targeted 2026 Q2 commentary: cadence accelerating; regional jets significant; capacity planning underway Accelerating retrofit program
Direct Foreign Military Sales (NATO/allies)FMS low double‑digit growth expected in 2025 High‑teens FMS growth expectation Mgmt now expects ~20% FMS growth; dFMS up to ~10% of CW revenue Strengthening demand
Naval programs (Columbia/Virginia, CVN)Strong Q4 orders and advances; backlog expansion Q1 boosted by timing; FY cadence stabilizes in H2 Q2 strong H1 ramp; H2 production stabilizes; aftermarket and UK content rising Solid sustained execution
Commercial Nuclear/SMRsUltra Energy acquisition closed Dec’24, expanding SMR content High single‑digit organic growth; SMR development ramp; AP1000 orders targeted by 2026 Rolls‑Royce SMR strategic partnership announced Aug 1; UK localization Upside building

Management Commentary

  • “Curtiss‑Wright delivered a strong second quarter, highlighted by double‑digit revenue growth… significant operating margin expansion… better‑than‑expected free cash flow generation.” — Lynn M. Bamford .
  • “We have increased our full‑year Adjusted guidance for sales, operating income, diluted EPS and free cash flow.” — Lynn M. Bamford .
  • CFO on tariffs: roughly 20% of portfolio subject to tariffs; ~$30M gross impact with mitigation to ~$10M net; actions include pricing and operational changes .
  • CFO on segment outlook: Defense Electronics margins to a new high 26.8–27.0%; A&I margin 17.3–17.6%; Naval & Power 16.3–16.5% .
  • Nuclear optionality: AP1000 reactor orders anticipated by 2026; U.S. executive actions to accelerate large reactors and SMRs; partnership with Rolls‑Royce SMR .

Q&A Highlights

  • Defense Electronics margins sustainability: driven by throughput, commercial and operational excellence, some pricing wins; balanced by ERP implementation and R&D ramp; margins expected to hold near Q2 levels even with Q3 sales dip .
  • Flight Data Recorder retrofit cadence: expected to accelerate; broad regional jet coverage; Airbus qualification targeted for 2026; capacity planning underway .
  • M&A pipeline/capital allocation: near‑term targets dismissed for fit; active pipeline (private preferred); board increased buyback authorization by $400M to $534M; emphasis on returning capital .
  • Ground Defense revenue timing: Q3 sequential decline expected due to order timing/CR; Q4 surge anticipated; Q2 Defense Electronics book‑to‑bill ~0.9; backlog +3% y/y .
  • FMS mix and segments: expanding European demand (e.g., Rheinmetall Boxer); dFMS ~10% of CW revenue expected; strong naval aircraft handling/arresting systems internationally .
  • Columbia-class status: H1 ramp driven by material receipts; production stabilizes in H2; progressing towards desired cadence of one per year .

Estimates Context

MetricConsensus*ActualSurprise
Revenue ($USD Millions)$852.5*$876.6 +$24.0 (+2.8%)*
Adjusted EPS ($)$3.126*$3.23 +$0.104 (+3.3%)*
EBITDA ($USD Millions)$184.9*$196.8*+$11.9 (+6.4%)*

Values retrieved from S&P Global.*

Implications: modest beats across revenue, EPS, and EBITDA suggest estimates likely inch higher for H2; management reiterated Q3 revenue dip in Ground Defense before strong Q4, so estimates should reflect mix‑driven margin finish .

Key Takeaways for Investors

  • Broad‑based execution: strongest y/y growth in Naval & Power and Defense Electronics with structural margin expansion, positioning for above‑consensus H2 finish if demand cadence holds .
  • Raised FY25 guidance is a positive near‑term catalyst; operating margin now 18.5–18.7% with levers (pricing, throughput, mix) offsetting tariff/R&D headwinds .
  • Watch Q3 set‑up: Ground Defense revenue timing likely soft; management expects maintained margins and a strong Q4 ramp; any order timing resolution into late Q3 would be supportive .
  • Flight Data Recorder retrofit represents a multi‑year secular tailwind; Airbus qualification in 2026 adds optionality; consider upside in commercial aero within Defense Electronics .
  • Commercial nuclear optionality building: AP1000 orders targeted by 2026; Rolls‑Royce SMR partnership adds UK localization and content breadth; medium‑term thesis leverages SMR prototypes ramp .
  • Balance sheet/capital returns: enhanced buyback authorization and dividend increase support TSR while management remains selective on M&A .
  • Tactical trade: into Q3, favor earnings quality and margin resilience; into Q4, backlog conversion and A&D mix could drive upside; monitor tariff developments and FMS momentum .