Highly engineered and technologically advanced products and services provider Curtiss-Wright Corporation (CW) manufactures sophisticated electronics products for air, ground, and naval defense. The Charlotte, N.C.-based company reported better-than-expected profitability, a strong balance sheet, and adjusted sales growth driven by the aerospace and defense (A&D) and commercial markets. CW’s new orders grew 19% year-over-year to $676 million, driven by solid demand from the A&D markets for its commercial aerospace and naval defense products. Shares of CW have gained 15.6% in price over the past six months, closing its last trading session at $151.32.
In addition, the engineering firm’s acquisition of Safran’s aerospace arresting systems business for $240 million could further boost its revenue and diversify its portfolio. Also, its financials look promising. CW’s 21.2% trailing-12-month EBITDA margin is 59.3% higher than the 13.3% industry average. And the critical technologies manufacturer’s continuing efforts to drive portfolio diversification to capitalize on the growing demand in the defense and commercial aerospace markets should position it to grow both organically and inorganically.
Here is what could shape CW’s performance in the coming months:
Impressive Growth Potential
Analysts expect CW’s EPS to increase 17.3% year-over-year to $1.83 in the next quarter, ending June 30, 2022. Its consensus EPS estimates indicate an 11.6% increase in the current year and a 7.2% increase in its fiscal 2023. Also, its EPS is expected to grow at 140% per annum over the next five years. CW also has an impressive earnings surprise history; it surpassed the Street’s estimates in each of the trailing four quarters.
The $2.56 billion consensus revenue estimate for its fiscal year 2022 indicates a 2% improvement year-over-year. Also, its revenue is estimated to increase 4% year-over-year to $2.66 billion in 2023.
Strategic Agreements Can Boost Growth
In February, CW signed an agreement with Teledyne FLIR Defense to offer unmanned systems and integrated solutions to the U.S. nuclear power market and the Department of Energy (DOE). The company’s efforts to modernize its plant systems and equipment for the U.S. nuclear fleet and DOE should help expand its portfolio and strengthen its position in the nuclear power generation market.
In addition, CW has been selected to help extend the life expectancy of the fifth-generation F-35 fighter jet flown by the U.S. Marine Corps. This strategic partnership to support the military’s premier fighter jet program should bolster its growth significantly.
Solid Financial Performance
For the fourth quarter, ended Dec. 31, 2021, CW’s total adjusted sales grew 2% year-over-year to $655 million. Its operating income under the Aerospace and Industrial segment rose 20% from the prior-year period to $40 million, while its operating margin rose 200 basis points to 19.5%. The company’s net earnings came in at $76.58 million, representing a 41.8% year-over-year increase. Also, its adjusted EPS amounted to $2.40 for the quarter, up 6% from the same period last year.
CW’s 10.7% trailing-12-month net income margin is 62.3% higher than the 6.6% industry average. Also, the company’s trailing-12-month levered free cash flow margin and ROE of 12.5% and 14.8%, respectively, compare favorably with the industry averages. Also, its 387.67 million trailing-12-month cash from operations is 94.2% higher than the $199.60 million industry average.
POWR Ratings Reflect Promising Outlook
CW has an overall B rating, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system evaluates each stock based on eight distinct categories. CW has a Quality Grade of A. The stock’s higher-than-industry EBITDA margin and net income margin are in sync with this grade. In addition, it has a B grade for Stability.
Click here to see the additional POWR Ratings for CW (Sentiment, Growth, Value, and Momentum).
The stock is ranked #8 of 75 stocks in the B-rated Industrial – Machinery industry.
The aviation company expects to grow its operating margin by 10 – 30 basis points for the full-year 2022. CW’s continuing focus on generating long-term profitable growth should help the company strengthen its position in the defense and commercial markets. In addition, given its strategic partnerships to expand its portfolio, we think CW is a quality stock that could be a wise bet now.
How Does Curtiss-Wright Stack Up Against its Peers?
While CW has an overall POWR Rating of B, one might want to consider investing in the following Industrial – Equipment stocks with an A (Strong Buy) rating: Tenant Company (TNC), Crane Co. (CR), and ABB Ltd. (ABB).
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CW shares were unchanged in premarket trading Monday. Year-to-date, CW has gained 9.25%, versus a -7.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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