Curtiss-Wright (CW) Q2 2024 earnings summary

Executive summary

• Q2 2024 sales reached $785 million, up 11% year-over-year, with strong growth in Defense Electronics, Naval & Power, and Aerospace & Defense markets.

• Operating income rose 16% to $133 million, and adjusted diluted EPS increased 24% to $2.67.

• Free cash flow was $100 million with a 97% conversion rate; order book grew 18% to $995 million, driving a record $3.2 billion backlog.

• Launched a restructuring program and cost-saving initiatives, mainly impacting Aerospace & Industrial, with $15 million in 2024 costs and $10 million in annualized savings expected by 2025.

• Announced $200 million acquisition of Ultra Energy, expected to close in Q3 2024 and be accretive to EPS and FCF.

Financial highlights

• Q2 sales up 11% year-over-year to $785 million; operating income up 16% to $133 million; adjusted EPS up 24% to $2.67.

• Free cash flow of $100 million with 97% conversion; book-to-bill ratio of 1.3x; backlog at $3.2 billion.

• Gross margin for Q2 was 36.2%; operating margin expanded by 60 bps year-over-year to 17.0% (adjusted).

• Six-month net sales increased 12% year-over-year to $1.50 billion; six-month net earnings rose 28% to $176 million.

• Dividend increased to $0.21 per share in Q2; share repurchases ongoing.

Outlook and guidance

• Full-year 2024 guidance raised: sales growth 6%-8%, EPS growth 11%-14%, FCF $425-$445 million, and operating margin 17.4%-17.6%.

• Segment sales growth guidance: Aerospace & Industrial 4%-6%, Defense Electronics 8%-10%, Naval & Power 5%-7%.

• A&D market sales expected to grow 10%-12% in 2024; commercial markets flat to up 1%-3%.

• 68% of 2024 revenues projected from aerospace & defense markets; 88% of backlog expected to convert to sales over 36 months.

• Effective tax rate reduced to 22.5% following U.K. legal entity consolidation.