Yahoo Finance Curtiss-Wright Corp (CW) (Q1 2024) Earnings Call Transcript Highlights: Robust Growth and ...
Sales: $713 million, up 13% year-over-year
Operating Income: Increased 23% year-over-year
Diluted EPS: $1.99, up 30% year-over-year
Adjusted Free Cash Flow: Improved 37% year-over-year
New Orders: $900 million, up 26% year-over-year
Book-to-Bill Ratio: 1.26x
Backlog: Exceeded $3 billion
2024 Sales Growth Guidance: Increased to 5-7%
2024 Operating Income and EPS: Expected to increase
2024 Free Cash Flow Guidance: $415 million to $435 million
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Sales of $713 million increased 13% year-over-year, driven by strong performance in the Defense Electronics segment.
Operating income increased 23% year-over-year, resulting in 110 basis points of overall operating margin expansion.
Diluted earnings per share of $1.99 increased 30% year-over-year, primarily due to higher sales.
Adjusted free cash flow showed a year-over-year improvement of 37%, reflecting strong financial management.
Record backlog in excess of $3 billion provides visibility and confidence in achieving updated 2024 financial guidance.
Negative Points
Encountered a $10 million headwind based on a change in estimate on a single naval contract within the Naval and Power segment.
Technical challenges at a key milestone in the naval contract, although a path to resolution is being worked on.
Despite strong sales growth, the Aerospace and Industrial segment's profitability was offset by unfavorable mix and timing on lower-margin development programs.
Naval and Power segment's operating performance was negatively impacted by the naval contract adjustment.
The company faces ongoing challenges in managing supply chain stability, although it has stabilized since early 2023.
Q & A Highlights
Q: Can you discuss the $10 million charge related to the Naval and Power segment and whether there is a path to recovering this cost? A: Lynn M. Bamford, CEO & Chairman of Curtiss-Wright, explained that the charge was due to a technical challenge at a key stage in a naval contract. The company has taken measures to manage technical and financial risks to avoid such situations and does not view this as a recurring event. Although the charge has been accounted for in the guidance, efforts to recover some of the costs will continue.
Q: What is driving the strong growth in the Defense Electronics market, and how much is due to supply chain improvements versus actual demand increases? A: Lynn M. Bamford stated that the growth in Defense Electronics is primarily driven by robust demand rather than supply chain improvements. The company has stabilized its supply chain since early 2023 and is now focusing on meeting the strong demand across its defense electronics products.
Q: Can you provide insights into the Ground Defense guidance increase and the expected business cadence for the rest of the year? A: K. Christopher Farkas, VP & CFO, noted that Q1 performance was driven by high tactical communications equipment sales, which are expected to continue ramping up. The business may see periodic fluctuations due to the ship-and-bill nature of many deals but anticipates a stronger second half of the year.
Q: How is the Commercial Aerospace sector performing, especially concerning the Boeing 737 MAX and other aircraft? A: K. Christopher Farkas mentioned that Curtiss-Wright's production rates are aligned with Boeing and Airbus. Specifically, for the Boeing 737 MAX, Curtiss-Wright is matching Boeing's production expectations, and they are seeing positive trends across Airbus and wide-body platforms.
Q: Is PacStar involved in the DoD's JADC2 program, and how does this align with trends in tactical communications? A: Lynn M. Bamford highlighted that while specific program involvement like JADC2 wasn't confirmed, the broader trend of connecting sensors to shooters is a significant focus within the DoD, and PacStar is well-positioned to support these initiatives due to its strong customer relationships and rapid technology adaptation.
Q: What are the long-term growth plans for Curtiss-Wright, and are there considerations for transformational acquisitions or portfolio adjustments? A: Lynn M. Bamford expressed openness to transformational acquisitions but emphasized that the company's current portfolio offers significant growth opportunities across various markets. The focus remains on driving growth and profitability through strategic investments and maintaining a balanced approach across all business units.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
