A month has gone by since the last earnings report for Curtiss-Wright (CW). Shares have added about 4.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Curtiss-Wright due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Curtiss-Wright's Q2 Earnings Beat, '23 Sales View Up
Curtiss-Wright reported second-quarter 2023 adjusted earnings per share (EPS) of $2.15, which surpassed the Zacks Consensus Estimate of $1.97 by 9.1%.
The company reported a GAAP EPS of $2.10, up from $1.83 in the year-ago quarter.
In the quarter under review, the company’s net sales of $704.4 million went up 15.6% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $649 million by 8.6%.
The company reported operating income of $112.8 million in the second quarter, soaring 15% year over year. The operating margin contracted 10 basis points (bps) to 16%.
Curtiss-Wright’s total backlog at the end of the second quarter was $2.8 billion, up from $2.7 billion at the end of the first quarter.
New orders of $842 million increased 8% year over year in the second quarter, driven by the strong demand for defense electronics, naval defense products and nuclear aftermarket products.
Aerospace & Industrial: Sales in this segment improved 8.5% year over year to $226.3 million. The upside was driven by strong demand and higher OEM sales of sensors products and surface treatment services on narrowbody and widebody platforms, increased sales of industrial automation products and surface treatment services and favorable timing of sales for its actuation equipment supporting various programs.
While the operating income increased 9.9% to $35.7 million, the operating margin expanded 20 bps to 15.8%.
Defense Electronics: Sales in this segment increased 32.2% year over year to $197.7 million. This rise was due to increased sales of avionics and flight test equipment on various domestic and international platforms and higher sales of tactical battlefield communications equipment. Also, increased sales of its embedded computing and flight test instrumentation equipment on various fighter jet programs contributed to this segment’s revenue growth.
The operating income increased 76.5% to $43.2 million, while the operating margin increased 540 bps to 21.8%.
Naval & Power: Sales in this segment increased 11.6% year over year to $280.4 million, driven by solid contributions from the arresting systems acquisition and strong demand from international customers. Moreover, higher revenues from Columbia-class and Virginia-class submarines, as well as strong growth in industrial valve sales in the process market and solid growth in commercial nuclear aftermarket revenues, contributed to this unit’s top-line growth.
The unit’s operating income decreased 1% to $46.8 million. The operating margin fell 320 bps to 16.7%. This decrease was due to the unfavorable mix of products.
CW’s cash and cash equivalents as of Jun 30, 2023, were $158.7 million compared with $256.9 million as of Dec 31, 2022.
The long-term debt was $1,176.1 million as of Jun 30, 2023, compared with $1,051.9 million as of Dec 31, 2022.
The operating cash inflow totaled $19.4 million at the end of the second quarter of 2023 against cash outflow of $93.3 million in the prior-year period.
The adjusted free cash flow at the end of the reported quarter was $6.7 million against free cash outflow of $89.5 million recorded a year ago.
Curtiss-Wright increased its financial guidance for 2023. The company now expects to generate adjusted earnings in the band of $8.90-$9.15 compared with the earlier guidance of $8.65-$8.90. The Zacks Consensus Estimate for the company’s full-year earnings is pegged at $8.89 per share, which is lower than the CW’s guided range.
Curtiss-Wright now expects sales in the range of $2,730-$2,790 million, up from the prior guidance of $2,655-$2,710 million. The Zacks Consensus Estimate for its full-year sales is pegged at $2.70 billion, lower than the company’s guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
At this time, Curtiss-Wright has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Curtiss-Wright has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Curtiss-Wright belongs to the Zacks Aerospace - Defense Equipment industry. Another stock from the same industry, Teledyne Technologies (TDY), has gained 9.5% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Teledyne reported revenues of $1.42 billion in the last reported quarter, representing a year-over-year change of +5.1%. EPS of $4.67 for the same period compares with $4.43 a year ago.
For the current quarter, Teledyne is expected to post earnings of $4.74 per share, indicating a change of +4.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Teledyne. Also, the stock has a VGM Score of C.
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