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Curtiss-Wright (CW) Tops Q3 Earnings Estimates, Ups EPS View

Zacks Equity Research

Curtiss-Wright Corporation CW reported third-quarter 2019 adjusted earnings of $1.95 per share, which surpassed the Zacks Consensus Estimate of $1.83 by 6.6%. The bottom line also improved 14% from the prior-year quarter earnings of $1.70.

Excluding one-time items, GAAP earnings came in at $1.92 per share, also up 14% from $1.68 recorded in the year-ago quarter. This year-over-year improvement can be attributed to higher segment operating income and lower corporate expenses.

Operational Performance

In the quarter under review, the company’s total sales of $614.9 million rose 3% year over year. The top line, however, missed the Zacks Consensus Estimate of $620 million by 0.9%.

Gross profit rose 2% year over year to $226.1 million. Operating income of $105.6 million improved 9% from $97 million a year ago.

Curtiss-Wright’s total backlog at the end of the third quarter was $2.2 billion, flat sequentially. New orders rose 10% year over year to $2 billion in the first nine months of 2019, courtesy of strong organic growth in naval defense and commercial aerospace orders.

Curtiss-Wright Corporation Price, Consensus and EPS Surprise

Curtiss-Wright Corporation Price, Consensus and EPS Surprise

Curtiss-Wright Corporation price-consensus-eps-surprise-chart | Curtiss-Wright Corporation Quote

Segmental Performance

Commercial/Industrial: Sales at this segment rose 3% year over year to $304.9 million. Higher sales of surface treatment services and sensors along with increased sales of actuation systems in relation to the F-35 program and higher sales of valves on account of the Virginia class submarine program were the primary catalysts behind this unit’s top-line growth in the reported quarter.

While operating income increased 7% to $48.1 million, operating margin expanded 60 basis points (bps) to 15.8%. The improvement in operating margin was driven by favorable overhead absorption on higher naval defense revenues.

Defense: Sales at this segment grew 8% year over year to $149.9 million. This can be attributed to higher sales of embedded computing equipment on various programs, most notably the F-35 Joint Strike Fighter and the Apache and Seahawk helicopter programs. Also, higher sales of embedded computing equipment on submarine programs contributed to this segment’s top-line growth.

Meanwhile, adjusted operating income improved 16% to $38.8 million and adjusted operating margin expanded 150 bps to 25.8%. The upside in operating income can be attributed to favorable mix on strong sales of the company’s defense electronics products.

Power: Sales at this segment slipped 1% year over year to $160.1 million on account of higher Virginia class submarine and CVN-80 aircraft carrier revenues. Also, solid service center revenues contributed to this unit’s top-line growth.

While adjusted operating income dropped 7% to $26.4 million, operating margin contracted 110 bps to 17.1%. Both the downsides were on account of lower China Direct AP1000 program revenues.

Financial Update

Curtiss-Wright ended the third quarter with cash and cash equivalents of $297.7 million, up 8% from $276.1 million as of Dec 31, 2018. Long-term debt was $761.4 million compared with $762.3 million as of Dec 31, 2018.

Operating cash outflow from continuing operations totaled $118.6 million at the end of the reported quarter compared with $72.3 million at the end of the prior-year quarter.

Adjusted free cash flow at the end of the quarter was $107 million compared with the year-ago figure of $61.9 million. During the third quarter, the company repurchased 0.10 million shares worth $13 million.

Guidance

Curtiss-Wright updated its financial guidance for 2019. The company currently expects adjusted earnings of $7.15-$7.25 per share compared with $7.00-$7.15 per share guided earlier. The Zacks Consensus Estimate for the company’s full-year earnings is pegged at $7.10, lower than the company’s guided range.

The company currently expects to generate sales in the range of $2,500-$2,535 million, down from the prior guided range of $2,510-$2,550 million. The Zacks Consensus Estimate for the company’s full-year sales is pegged at $2.52 billion, in line with the mid-point of the company’s guided range.

These apart, Curtiss-Wright currently expects its adjusted free cash flow in the range of $340-$350 million compared with the earlier guidance range of $330-$340 million for the current year.

Zacks Rank

Curtiss-Wright has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Lockheed Martin Corp. LMT reported third-quarter 2019 earnings of $5.66 per share, which surpassed the Zacks Consensus Estimate of $5.03 by 12.5%. The bottom line also improved 10.1% from $5.14 in the year-ago quarter.

Textron Inc. TXT reported third-quarter 2019 earnings from continuing operations of 95 cents per share, which surpassed the Zacks Consensus Estimate of 85 cents by 11.8%. The bottom line increased 55.7% from the year-ago quarter.

General Dynamics Corporation GD reported third-quarter 2019 earnings from continuing operations of $3.14 per share, which beat the Zacks Consensus Estimate of $3.06 by 2.6%. The bottom line also improved 10.2% from the prior-year quarter’s $2.85.

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