Curtiss-Wright Lifts Outlook on Record Orders

Curtiss-Wright Corp ((CW)) has held its Q1 earnings call. Read on for the main highlights of the call.

Curtiss-Wright Corp opened its latest earnings call on a notably upbeat note, underscoring broad-based strength across its portfolio and a clear tilt toward growth. Management highlighted double-digit gains in revenue and earnings, expanding margins, and a record backlog, while acknowledging some timing and supply-chain risks that appear manageable relative to the company’s momentum.

Top-Line Growth

Curtiss-Wright reported first quarter sales of $914 million, a 13% increase from the prior year as all major end markets contributed to the expansion. The breadth of this growth suggests the company is not leaning on a single program or customer, which can offer investors a degree of resilience if one segment slows.

Earnings and Margin Expansion

Profitability moved even faster than revenue, with diluted EPS up 23% year-over-year and consolidated operating margin reaching 17.6%. That 100 basis point margin expansion reflects better mix, cost controls, and operating leverage, and it reinforces the company’s narrative that its portfolio can deliver incremental profits as volumes climb.

Record Order Momentum and Backlog

New orders rose 15% in the quarter, producing a book-to-bill ratio of 1.3 times and signaling that demand is outpacing current shipments. The order backlog swelled to nearly $4.3 billion, a new record that provides strong visibility into future top-line growth and underpins management’s confidence in its raised outlook.

Raised Full-Year Outlook

Management lifted its full-year 2026 guidance, now calling for total sales to grow 7% to 8% and operating margins to reach 19.0% to 19.2%. Diluted EPS is expected to climb 13% to 16%, and free cash flow is now projected at $580 million to $600 million, reflecting both higher profits and strong cash conversion.

Segment Outperformance in Naval & Power

The Naval & Power segment stood out with sales up 21% and operating income up 33%, driving a 140 basis point margin expansion. A robust 1.5 times book-to-bill, fueled by submarine production ramps and commercial nuclear aftermarket demand, positions this unit as a central growth engine over the next several years.

Aerospace & Industrial Strength

Aerospace & Industrial posted a 12% sales increase and a 24% jump in operating income, with margins expanding by 150 basis points. Growth was supported by defense actuation and sensors, commercial aerospace production at OEMs, favorable factory absorption, and benefits from prior restructuring, combining to enhance profitability.

Defense Electronics Profitability

Defense Electronics maintained impressive profitability with an operating margin of 28.1%, up 60 basis points year-over-year. Higher embedded computing and flight recorder sales helped deliver the segment’s best performance since the third quarter of 2024, underscoring the franchise value of its electronic subsystems.

Commercial Nuclear and SMR Progress

Commercial nuclear remains a bright spot, with guidance implying mid- to high-teens growth as the company advances from design to prototyping on its work with X-energy. Small modular reactor-related revenue is expected to rise to about 12% of commercial nuclear sales, up from roughly 10%, reinforcing Curtiss-Wright’s positioning in next-generation nuclear projects.

Cash Generation and Capital Discipline

Free cash flow conversion is expected at approximately 105%, with management targeting working capital below 18% and raising its FCF outlook to a record range of $580 million to $600 million. The balance sheet remains a strength, highlighted by roughly $3 billion of revolver capacity and leverage near record lows, giving the company flexibility to fund growth.

Strategic Investment and M&A Capacity

The company has stepped up R&D and capacity investments to support naval and nuclear opportunities while keeping a disciplined stance on acquisitions. After deploying about $2.5 billion since its pivot to growth, Curtiss-Wright says it remains focused on accretive deals and retains significant borrowing capacity to act when attractive assets surface.

Ground Defense and Budget Timing Risks

Ground defense revenue was flat in the quarter and tactical communications declined, reflecting program timing and U.S. budget uncertainty. Management is maintaining a cautious stance on this market as FY2026 budget delays and past shutdowns create timing risks that could pressure near-term revenue.

Near-Term Pressure in Defense Electronics

Despite strong margins, management warned that Defense Electronics could see revenue pressure in the second quarter due to prior timing shifts. Some short-cycle businesses have experienced delays in turning orders into near-term sales, which could temporarily dampen growth even as demand trends stay positive.

General Industrial Weakness

General industrial markets remain sluggish, with sales expected to be flat in 2026 as the recovery progresses slowly. Management expressed cautious optimism for a return to growth in 2027, but investors should expect subdued contributions from this end market in the near term.

Supply-Chain Watch Items

The company flagged semiconductor components, particularly memory and storage chips, and rare earth materials as ongoing supply-chain watch points. While Curtiss-Wright believes these risks are currently manageable, any deterioration could constrain production in certain programs and deserves investor attention.

Slower CVR Aftermarket Retrofits

Cockpit voice recorder aftermarket retrofits have lagged management’s expectations even after a recent regulatory mandate. As a result, this aftermarket business is running relatively flat year-over-year, with stronger growth now pushed out to later periods as airlines and operators phase in upgrades.

M&A Market Headwinds

Management described a challenging M&A landscape, citing a scarcity of high-quality strategic targets and elevated valuation multiples. Competition for attractive assets is intense, making it harder to find immediately accretive deals, and reinforcing the company’s cautious approach despite its ample financial capacity.

AP1000 Order Timing Uncertainty

Curtiss-Wright expects an order for reactor coolant pumps tied to AP1000 reactors this year but acknowledged that timing remains uncertain. Because revenue recognition for such programs spans four to five years, management excluded AP1000 contributions from the 2026 outlook, effectively making any upside a potential bonus.

Higher Growth Investments and CapEx

Growth-focused capital expenditures are moving higher, with management pointing to nearly a 30% year-over-year increase in such investments. While this represents near-term cash deployment pressure, the company expects strong operating performance to offset the spend and create capacity for future earnings.

Guidance and Outlook

Looking ahead, Curtiss-Wright now expects sales to grow 7% to 8%, operating income to rise 9% to 12%, and operating margins to climb to about 19.0% to 19.2%. EPS is guided to $14.90 to $15.30, with record free cash flow of $580 million to $600 million and about 105% cash conversion, supported by segment-level growth across aerospace, defense, and nuclear markets.

Curtiss-Wright’s latest earnings call painted the picture of a company leaning into secular growth in defense and nuclear, backed by record orders and improved profitability. While near-term headwinds around budgets, supply chains, and general industrial demand remain, the combination of upgraded guidance, strong cash generation, and disciplined capital allocation will likely keep the stock on the radar of long-term growth-oriented investors.