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Why Is Curtiss-Wright (CW) Up 4.4% Since Last Earnings Report?

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Zacks Equity Research
·4 min read
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It has been about a month since the last earnings report for Curtiss-Wright (CW). Shares have added about 4.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Curtiss-Wright Q4 Earnings Top Estimates, Revenues Miss

Curtiss-Wright reported fourth-quarter 2020 adjusted earnings of $2.39 per share, which surpassed the Zacks Consensus Estimate of $2.34 by 2.1%. The bottom line also improved 12.7% from the prior-year quarter’s earnings of $2.12.

Including one-time items, GAAP earnings came in at $1.30 per share compared with $2.08 recorded in the year-ago quarter.

For 2020, the company reported adjusted earnings of $6.87 per share, which missed the Zacks Consensus Estimate of $7.31 by 6%. The full-year bottom line also declined 5.5% from the prior-year figure.

Operational Performance

In the quarter under review, the company’s total sales of $668.4 million inched up 2% year over year, led by strong 15% organic growth in defense markets. The top line, however, missed the Zacks Consensus Estimate of $672 million by 0.5%.

In 2020, the company’s total sales of $2.39 billion declined 4% from the year-ago figure. The top line, also, missed the Zacks Consensus Estimate of $2.55 billion by 6.3%.

Gross profit declined 2% year over year to $241.8 million in the reported quarter. Operating income of $76.5 million plunged 37% from $120.7 million a year ago.

Curtiss-Wright’s total backlog at the end of 2020 was $2.2 billion. New orders of $573 million decreased 2% compared with the prior-year period.

Segmental Performance

Commercial/Industrial: Sales in this segment declined 16% year over year to $249.2 million. This can be attributed to reduced OEM sales of actuation and sensors equipment as well as surface treatment services.

While operating income declined 4% to $47.3 million, operating margin expanded 230 basis points (bps) to 19%.

Defense: Sales in this segment grew 26% year over year to $217.5 million. This can be attributed to higher sales of embedded computing and flight test instrumentation equipment on various fighter jet programs.

Meanwhile, adjusted operating income improved 20% to $52.9 million and adjusted operating margin contracted 130 bps to 24.2%.

Power: Sales in this segment improved 8% year over year to $201.8 million on account of higher production revenues on Virginia and Columbia class submarines, CVN-80 and CVN-81 aircraft carriers and higher service center sales.

While adjusted operating income rose 12% to $42.6 million, operating margin expanded 70 bps to 21.1%.

Financial Update

Curtiss-Wright ended 2020 with cash and cash equivalents of $198.2 million, down 49% from $391 million as of Dec 31, 2019.

Long-term debt as of Dec 31, 2020, was $958.3 million compared with $760.6 million as of Dec 31, 2019.

Operating cash inflow from continuing operations totaled $261.2 million at the end of 2020 compared with $421.4 million at the end of 2019.

Guidance

Curtiss-Wright issued its financial guidance for 2021. The company currently expects adjusted earnings of $7.00-$7.20 per share.

The Zacks Consensus Estimate for the company’s full-year earnings is pegged at $7.91 per share, higher than the company’s guided range.

The company currently expects to generate sales of $2,445-$2,495 million. The Zacks Consensus Estimate for the company’s full-year sales is pegged at $2,670 million, above the company’s guided range.

Apart from these, Curtiss-Wright currently expects its adjusted free cash flow in the range of $330-$360 million.


 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -15.21% due to these changes.

VGM Scores

Currently, Curtiss-Wright has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Curtiss-Wright has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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