Q4 2024 Summary
Published Feb 13, 2025, 10:47 PM UTC- Strong Growth in Foreign Military Sales (FMS): Curtiss-Wright has experienced significant growth in FMS, with more than 20% increase in 2023 and a 10% increase in 2024, despite timing issues. The company expects to continue growing at a low double-digit plus pace, driven by strong demand across defense electronics and naval products. Curtiss-Wright is well-positioned to benefit from increased global defense spending, especially in Europe, due to their strong partnership with Rheinmetall, a leading European vehicle manufacturer.
- Significant Opportunities in Process Markets Due to Pro-Fossil-Fuel Policies: The pro-nuclear and pro-fossil-fuel stance of the current administration is expected to benefit Curtiss-Wright's process markets. There is a potential $250 million opportunity in subsea pumps by the end of the decade, with ongoing developments with Shell and Petrobras. This represents a tailwind not just for subsea, but also for other equipment sold across the process industry.
- Robust Backlog and Growth in Aerospace & Defense Markets: Curtiss-Wright has a strong order book and backlog, including multiyear work in Naval & Power with a second-quarter book-to-bill ratio of 1.7x. There are solid opportunities for growth in Naval Defense, aerospace defense (including C5ISR and actuation systems for the F-35 program), and defense electronics. The company is investing in expanding capacity and footprint to support future growth.
- Deceleration of organic growth outlook in 2025: The company's organic growth outlook in 2025 is decelerating compared to 2024. An analyst pointed out that despite strong defense performance and record backlog, the organic growth outlook is in line with the mid-single digits laid out at Investor Day, and that the aerospace segment could have been better. This suggests potential slowing in growth momentum.
- Potential tariff headwinds impacting revenues or operating income: The company is facing potential tariff headwinds that could affect revenues or operating income. Management acknowledged that tariffs are a fluid situation and an ongoing topic of conversation, and while they feel confident in managing through it, tariffs could pose a risk to the company's financial performance.
- Lower growth in the commercial nuclear segment due to fewer outages: The company expects high single-digit organic growth in the commercial nuclear segment in 2025, compared to low double-digit growth in 2024 and the guidance for low double-digit growth in 2026. Management attributed this to lower year-over-year outages, which is a headwind that occurs once every three years, potentially impacting revenue growth in this segment.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Total Sales Growth | FY 2025 | 7% to 9% | 7% to 8% | lowered |
Operating Income | FY 2025 | 7% to 10% | 10% to 12% | raised |
Operating Margin | FY 2025 | 17.4% to 17.6% | 17.9% to 18.1% | raised |
Diluted EPS | FY 2025 | $10.55 to $10.75 | $12.10 to $12.40 | raised |
Free Cash Flow | FY 2025 | $430 million to $450 million | $485 million to $505 million | raised |
Capital Expenditures | FY 2025 | no prior guidance | Expected increase of $20 million year‑over‑year | no prior guidance |
Tax Rate | FY 2025 | no prior guidance | 22% | no prior guidance |
Share Repurchases | FY 2025 | no prior guidance | $60 million planned; $10 million YoY increase | no prior guidance |
End‑Market Guidance – Aerospace & Defense | FY 2025 | Aerospace defense: 9%–11%, Ground defense: 10%–12%, Naval defense: 9%–11%, Commercial aerospace: 16%–18% | Aerospace Defense: 6%–8%, Ground Defense: 3%–5%, Naval Defense: 3%–5%, Commercial Aerospace: 10%–12% | lowered |
End‑Market Guidance – Commercial Markets | FY 2025 | Power and process: 5%–7%, Commercial nuclear: low double‑digit, Process market: Flat, General industrial: Decline of 2%–4% | Power & Process: 16%–18%, Commercial Nuclear: high single‑digit organic & >20% total, Process Market: low to mid‑single‑digit, General Industrial: Flat | varied |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Diluted EPS | FY 2024 | $10.55 to $10.75 | 1.99+ 2.59+ 2.89+ 3.09= $10.56 | Met |
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Tariff Headwinds
Q: How are you anticipating potential tariff headwinds impacting revenues and profits?
A: Lynn Bamford acknowledged the fluid situation regarding tariffs and noted that while the company managed through previous tariffs with minimal impact—about $9 million in 2018, with half mitigated—they are confident in their ability to navigate the current environment. They have established cross-functional teams to mitigate potential impacts and feel confident in their 2025 guidance despite the uncertainties. -
Nuclear Business Growth
Q: What's the outlook for reactor cooling pump (RCP) orders and the nuclear business growth?
A: The company expects initial RCP orders within the next 1 to 2 years, aiming for an order by the end of 2026, with Poland being the anticipated first customer. Despite Poland moving its operational date from 2031 to 2033, this does not impact the expected order timeline. Additionally, potential opportunities are emerging in India and the possible restart of the V.C. Summer plant, contributing to their projection of the nuclear business growing 5x by the next decade, primarily through organic growth. , , -
Orders and Backlog
Q: Can you comment on the strong order flow and record backlog's impact on revenue outlook?
A: The company reported a strong order flow with a book-to-bill ratio of 1.3 in Naval & Power and 1.16 in Defense Electronics for 2024. The robust backlog, particularly in A&D markets, positions them well for future growth. They anticipate continued growth in naval defense and expect low double-digit plus pace in foreign military sales. , , -
Restructuring and Margin Impact
Q: What are the restructuring actions in Naval & Power, and how will they impact margins?
A: The company spent $15 million on restructuring to achieve $10 million in annualized savings, with $7 million benefiting 2025. Actions include footprint consolidation and efficiency improvements, mainly in Aerospace & Industrial and Defense Electronics. While there may be some short-term disruptions, these efforts are expected to positively impact margins over the year. , , -
Ultra Energy Acquisition
Q: How does the Ultra Energy acquisition enhance your strategic position?
A: The acquisition, completed on December 31, brings critical technologies and relationships, particularly in Europe. It strengthens their position with European small modular reactor (SMR) manufacturers like Rolls-Royce and expands their footprint with facilities in the U.K. and Texas. The acquisition is expected to broaden their product offerings and customer base, enhancing collaboration and market reach. -
Subsea Pump Business
Q: What's the outlook for the subsea pump business amid increased drilling activities?
A: Lynn Bamford indicated that the administration's pro-energy stance, including support for drilling and LNG, is favorable for Curtiss-Wright. They see potential in the subsea pump market, estimating an opportunity of $250 million by the end of the decade, with ongoing developments with Shell and Petrobras. -
Supply Chain and Labor Disruptions
Q: How are shipyard disruptions affecting your naval business?
A: The company is relatively decoupled from shipyard fluctuations due to the long lead times of their equipment. While aware of supply chain and labor disruptions at shipyards, they have not seen a direct impact on their business. They continue to seek opportunities to take on additional work as needed. , -
Foreign Military Sales
Q: How will increased European defense spending affect your foreign military sales?
A: With a strong presence in ground defense and partnerships with companies like Rheinmetall, Curtiss-Wright is well-positioned to benefit from increased European defense spending. They saw over 20% growth in direct foreign military sales in 2023, 10% growth in 2024, and expect continued low double-digit growth, driven by demand in ground defense, C5ISR, naval aircraft handling, and ground-based arresting systems. -
Transition with New Administration
Q: How is the new administration's policies impacting your business?
A: The company views the new administration's pro-nuclear and pro-energy policies as positive. Executive orders supporting energy dominance, nuclear power, and fossil fuels align with their businesses. They anticipate potential benefits from a government focus on efficiency and fixed-price contracts, which could streamline acquisition processes and favor companies like Curtiss-Wright. , ,