Why Is Curtiss-Wright (CW) Up 6.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Curtiss-Wright (CW). Shares have added about 6.7% in that time frame, underperforming 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 Q3 Earnings Top Estimates, Sales Rise Y/Y
Curtiss-Wright reported third-quarter 2022 adjusted earnings of $2.07 per share, which surpassed the Zacks Consensus Estimate of $2.03 by 1.9%. The bottom line also surged 10% on a year-over-year basis.
Operational Performance
In the quarter under review, the company’s net sales of $631 million went up 3% year over year. However, the top line missed the Zacks Consensus Estimate of $658 million by 4.2%.
The operating income of $114 million surged 6% from $108 million a year ago. The adjusted operating margin expanded 70 basis points (bps) to 18.2%, driven by the benefits of ongoing company-wide operational excellence initiatives and favorable overhead absorption on higher revenues in the Aerospace & Industrial and Naval & Power segments.
Curtiss-Wright’s total backlog at the end of the third quarter of 2022 was $2.6 billion. New orders of $818 million increased 32% in the third quarter compared with the prior-year period, driven by solid demand in the aerospace & defense market and commercial market demand.
Segmental Performance
Aerospace & Industrial: Sales in this segment improved 9% year over year to $213 million, primarily attributable to higher commercial aerospace market revenues. The upside in revenues was mainly due to the strong demand for actuation and sensor products and surface treatment services.
Further, higher general industrial market revenues, driven by the increased sale of industrial vehicle products, fueled the sales performance of the segment.
While the operating income increased 27% to $39 million, the operating margin expanded 260 bps to 18.3%. The upside in the margin was mainly due to favorable absorption on strong sales and the benefits of its ongoing operational excellence and pricing initiatives.
Defense Electronics:Sales in this segment declined 12% year over year to $161 million. This decline was due to ongoing supply-chain headwinds, lower aerospace defense market revenues and decreased ground defense market revenues.
The operating income plunged 14% to $37 million, while the operating margin contracted 50 bps to 22.7%. The deterioration can be attributed to unfavorable absorption on lower A&D revenues.
Naval & Power:Sales in this segment increased 9% year over year to $256 million due to the favorable impact of the arresting system acquisition and higher revenues from the CVN-81 aircraft carrier and Columbia-class submarine programs.
The unit’s operating income increased 11% to $48.5 million. The operating margin expanded 30 bps to 18.9%. This acceleration was due to the favorable absorption of higher organic revenues and the benefits of ongoing operational excellence initiatives.
Financial Update
CW’s cash and cash equivalents as of Sep 30, 2022 were $113.6 million compared with $171 million as of Dec 31, 2021.
The long-term debt was $1,141.2 million as of Sep 30, 2022 compared with $1,050.6 million as of Dec 31, 2021.
The operating cash outflow totaled $96 million at the end of the third quarter of 2022 compared with $107 million in the prior-year period.
Adjusted free cash flow at the end of the reported quarter was $86 million compared with the year-ago period’s $97 million.
2022 Guidance
Curtiss-Wright updated its financial guidance for 2022. The company now expects adjusted earnings in the band of $8.05-$8.20 per share compared with the prior range of $8.10-$8.30 per share.
The Zacks Consensus Estimate for the company’s full-year earnings is pegged at $8.19 per share, slightly lower than the midpoint of the company’s guided range.
The company also updated its adjusted sales guidance and now expects sales in the range of $2,525-$2,575 million compared with the prior range of $2,570-$2,620 million in 2022. The Zacks Consensus Estimate for its full-year sales is pegged at $2.59 billion, higher than the midpoint of the company’s guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Curtiss-Wright has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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.
Performance of an Industry Player
Curtiss-Wright belongs to the Zacks Aerospace - Defense Equipment industry. Another stock from the same industry, Aerojet Rocketdyne Holdings (AJRD), has gained 9.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Aerojet Rocketdyne reported revenues of $549.8 million in the last reported quarter, representing a year-over-year change of +0.8%. EPS of $0.45 for the same period compares with $0.58 a year ago.
For the current quarter, Aerojet Rocketdyne is expected to post earnings of $0.60 per share, indicating a change of +39.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.2% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Aerojet Rocketdyne. Also, the stock has a VGM Score of F.
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