Curtiss-Wright Corporation CW recently secured a couple of contracts worth more than $80 million to supply propulsion valves for the U.S. Navy’s Virginia-class nuclear-powered attack submarine and the Columbia-class submarines programs.
The company received an award from Bechtel Plant Machinery, Inc. (BPMI) for supporting ship construction and spare parts procurement. It secured another contract from General Dynamics’ GD subsidiary, Electric Boat, to support ship construction for Block V, including the new Virginia Payload Module.
Work related to the deal will be executed in East Farmingdale, NY, and is expected to continue through 2024.
The United States has been strengthening its naval power by upgrading missile submarines due to the rising widespread geopolitical tensions across the world. This is leading to increased number of contract provisions involving the production of submarines and their steady maintenance. Curtiss-Wright, being a prominent propulsion manufacturer in the U.S. defense space, has been benefiting from this trend.
Moreover, the fiscal 2020 defense budget includes a spending plan of $10.2 billion and $2.2 billion for the production of Virginia Class and Columbia-Class Submarines, respectively. Such notable spending provisions should usher in more contracts for Curtiss-Wright in relation to submarine equipment and spares, in the days ahead.
During the second quarter, the company witnessed higher sales in the naval defense market, which contributed $12 million, primarily backed by increased production in the Virginia-class submarine program. As the demand for both Virginia and Columbia-Class submarine programs is steadily growing, we expect Curtiss-Wright to continue witnessing higher sales in the days ahead, backed by pivotal contracts like the recent ones.
Per Market Research Future firm, the global submarine market is expected to see a 4.24% CAGR from 2018 to 2023. Such projections, going forward, will not only increase the submarine production demand but also lead to a rise in demand for associated equipment and parts, regular system modifications and upgrades of submarine variants. We expect such rising demand to significantly aid aerospace-defense equipment suppliers like Curtiss-Wright.
Shares of the company have gained 0.3% in the past six months compared with the industry’s growth of 11.2%.
Zacks Rank & Other Key Picks
Curtiss-Wright currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the same space are Aerojet Rocketdyne Holdings AJRD and Heico Corporation HEI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne came up with average positive earnings surprise of 25.46% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 13.8% to $1.90 in the past 90 days.
Heico pulled off average positive earnings surprise of 9.47% in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 4.7% north to $2.24 in the past 90 days.
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