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CURTISS WRIGHT CORP (CW)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered $824.3M revenue (+5% YoY), adjusted operating margin 19.8% (-100 bps YoY), and record adjusted EPS $3.27; free cash flow $278.0M with 223% conversion. New orders rose 37% to $939M (~1.1x book-to-bill).
  • Guidance: FY2025 sales $3.335–$3.385B (+7–8%), operating margin 17.9–18.1% (+40–60 bps), EPS $12.10–$12.40 (+11–14%), FCF $485–$505M; segment detail provided (A&I +3–5%, DE +7–9%, N&P +10–11%).
  • What went well: Naval & Power sales +12% on stronger-than-anticipated submarine demand; A&I adjusted margin expanded 280 bps to 21.3% on restructuring benefits; robust backlog >$3.4B (+20%).
  • What went wrong: Defense Electronics sales -5% and adjusted margin -450 bps on under-absorption, mix, higher R&D; consolidated adjusted margin -100 bps on segment mix and R&D.
  • Street context: S&P Global consensus estimates were unavailable at time of request; results anchored to company-reported metrics and guidance. (Consensus unavailable via S&P Global)

What Went Well and What Went Wrong

  • What Went Well

    • Naval & Power outperformed: “Revenue growth in the naval defense market was stronger than anticipated principally driven by higher demand and timing of revenues on the Virginia-class and Columbia-class submarine programs.”
    • A&I margin execution: “Adjusted operating margin up 280 basis points to 21.3%, as favorable absorption on higher revenues and restructuring/cost containment initiatives…”
    • Orders and cash: “New orders of $939 million…book-to-bill ~1.1x” and “Adjusted free cash flow conversion 223% in Q4.”
    • Management tone: “Record quarterly Adjusted diluted EPS of $3.27…strong free cash flow and robust order activity.”

  • What Went Wrong

    • Defense Electronics compression: “Adjusted operating margin decreased 450 basis points to 24.3%, primarily due to unfavorable absorption on lower defense revenues, unfavorable mix, and higher investment in R&D.”
    • Consolidated margin down: Adjusted consolidated operating margin fell 100 bps YoY to 19.8% on mix and higher R&D across segments.
    • Mix headwind in N&P: “Adjusted operating margin decreased 20 basis points…as favorable absorption on higher revenues was partially offset by unfavorable mix of products and higher R&D.”
    • CFO color: Defense Electronics had accelerated Q3 deliveries; Q4 saw sequential decline due to footprint realignment and mix headwinds.

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$785.8 $798.9 $824.3
Operating Income (GAAP, $USD Millions)$160.7 $144.9 $154.8
Operating Margin (GAAP, %)20.4% 18.1% 18.8%
Adjusted Operating Income ($USD Millions)$163.2 $149.1 $163.5
Adjusted Operating Margin (%)20.8% 18.7% 19.8%
Diluted EPS (GAAP, $)$3.11 $2.89 $3.09
Adjusted Diluted EPS ($)$3.16 $2.97 $3.27
Free Cash Flow ($USD Millions)$269.7 $162.7 $278.0

Segment performance (sales and margins):

SegmentQ4 2023 Sales ($MM)Q4 2024 Sales ($MM)Q4 2023 Adj Op MarginQ4 2024 Adj Op Margin
Aerospace & Industrial$238.2 $250.9 18.5% 21.3%
Defense Electronics$239.8 $227.5 28.8% 24.3%
Naval & Power$307.8 $345.9 19.3% 19.1%

End-market mix (Q4 comparison):

End MarketQ4 2023 ($MM)Q4 2024 ($MM)Change
Aerospace Defense$171.5 $171.4 ~Flat
Ground Defense$87.7 $84.7 -3%
Naval Defense$187.2 $216.9 +16%
Commercial Aerospace$92.7 $98.3 +6%
Power & Process$136.5 $146.8 +7%
General Industrial$110.1 $106.2 -3%

Key KPIs:

KPIQ4 2023Q4 2024
New Orders ($USD Millions)—$939
Book-to-Bill (x)—~1.1x
Adjusted FCF Conversion (%)221% 223%
Share Repurchases ($USD Millions)—$112

Notes on non-GAAP: Adjusted excludes first-year purchase accounting, 2024 restructuring costs, and divestiture trailing costs (as applicable).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Sales ($B)FY 2025N/A (first issuance)$3.335–$3.385 (+7–8% YoY) New
Operating Income ($MM)FY 2025N/A$598–$613 (+10–12% YoY) New
Operating Margin (%)FY 2025N/A17.9–18.1 (+40–60 bps) New
Diluted EPS ($)FY 2025N/A$12.10–$12.40 (+11–14% YoY) New
Free Cash Flow ($MM)FY 2025N/A$485–$505 (0–4% YoY) New
Effective Tax Rate (%)FY 2025N/A22.0% New
Diluted Shares (MM)FY 2025N/A~37.9 New
Capex ($MM)FY 2025N/A$75–$85 New
D&A ($MM)FY 2025N/A$115–$120 New
Segment SalesFY 2025N/AA&I $960–$975 (+3–5%); DE $975–$990 (+7–9%); N&P $1,400–$1,420 (+10–11%) New
End-Market GrowthFY 2025N/AA&D +5–7%; Commercial +9–11% (Power & Process +16–18%, GI Flat) New
DividendQ1 2025—Declared $0.21 per share Maintained vs recent level

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Defense Electronics footprint and level-loadingRestructuring to support future growth; accelerated Q2 revenues; aim to reduce Q4 “hockey stick” seasonality Sequential Q4 decline from Q3 due to pull-forwards and footprint moves; demand/backlog strong Stabilizing operations; near-term mix headwind
Foreign Military Sales (FMS)Strong FMS demand across DE and Naval; record bookings; outlook supportive Expect low double-digit FMS growth in 2025 across C5ISR, aircraft handling, arresting systems Accelerating
Commercial Nuclear aftermarket and SMR pipelineADVANCE Act supportive; low double-digit CAGR outlook; WSC acquisition; plant life extensions rising Ultra Energy integration expands UK footprint; high single-digit organic CN growth, >20% incl. acquisitions; SMR development ramp (X-energy, TerraPower) Building momentum
Subsea pumps (Process market)$250M potential by end of decade; Shell deployment by year-end; Petrobras development progressing Opportunity supported by pro-fossil stance; potential to reach $250M by decade end; Petrobras and others engaged Positive tailwind
Tariffs and macroCautious but resilient; supply chain improved; destocking stabilized Tiger teams formed; mitigation via pricing/contracting; guidance intact despite tariff uncertainty Managed risk
Pentagon engagement, contract structurePush toward firm-fixed-price aligns with CW strengths; increased visibility on Capitol Hill Continued proactive outreach; efficiency focus seen as positive for value delivery Supportive policy backdrop

Management Commentary

  • CEO remarks: “Curtiss-Wright concluded the year with…record quarterly Adjusted diluted EPS of $3.27, strong free cash flow and robust order activity.”
  • Strategy and 2025 outlook: “We anticipate total sales growth of 7% to 8%…operating margin expansion of 40 to 60 bps…double-digit EPS growth and strong free cash flow generation.”
  • Acquisitions: “Closed Ultra Energy on Dec 31…leveraging UK-based nuclear manufacturing footprint…expands presence with leading global SMR designers.”
  • Backlog and nuclear optionality: “Backlog was up 20%…projecting our commercial nuclear business to grow fivefold by the middle of the next decade to an annual run rate of $1.5 billion.”

Q&A Highlights

  • Ultra Energy strategic fit: Enhances European footprint and SMR positioning; complements UK nuclear submarine support; broader applicability for high-temp sensors across aerospace/process.
  • FMS growth: Expected low double-digit plus in 2025, benefiting C5ISR, aircraft handling, and arresting systems.
  • Tariffs: Management standing up cross-functional teams; balance of mitigation via price recovery and operational changes; confident in guidance.
  • Reactor Coolant Pumps (AP1000): Initial order anticipated by end of 2026; developments in Poland and potential in India/VC Summer noted.
  • Naval & Power mix: Q4 beat partly material-related receipts; margin impacted by mix; aftermarket and international aircraft handling providing growth.
  • Restructuring savings: ~$15M 2024 spend for ~$10M annualized savings (A&I primary beneficiary); DE footprint expansion to support growth.

Estimates Context

  • S&P Global consensus (EPS, revenue) for Q4 2024 and near-term periods was unavailable due to provider limits at the time of retrieval; comparisons to Street estimates cannot be provided. (Consensus unavailable via S&P Global)
  • Sell-side models will likely refresh to incorporate management’s FY2025 guidance: +7–8% sales growth, +40–60 bps margin expansion, and +11–14% EPS growth; segment and end-market details support updated assumptions.

Key Takeaways for Investors

  • Quality execution with durable demand: Strong Q4 and record FY24 outcomes; backlog >$3.4B and orders +20% in FY24 support 2025 visibility.
  • Mix-driven margin dynamics: Expect margin expansion in 2025 despite near-term DE/N&P mix and higher R&D; restructuring savings underpin A&I margin resilience.
  • Nuclear optionality strengthening: Ultra Energy broadens geographic reach and SMR content; management reiterates multi-year nuclear growth trajectory.
  • Defense electronics: Temporary footprint actions and Q3 pull-forwards weighed on Q4 sequential; backlog/order strength intact for 2025.
  • Cash return and balance sheet: $250M repurchases in 2024; minimum $60M planned in 2025; dividend maintained at $0.21.
  • Trading implications: Positive catalysts include robust 2025 guide, A&D demand, nuclear wins; watch DE/N&P mix and tariff developments for near-term volatility.
  • Medium-term thesis: Pivot to Growth strategy targeting >5% organic CAGR, margin expansion, and double-digit EPS growth with nuclear upside optionality.