Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Curtiss-Wright Corp (CW, Financial) reported a strong 11% year-over-year increase in sales for Q2 2024, driven by better-than-expected performance in the Defense Electronics segment.
- Operating income increased by 16% year-over-year, resulting in a 60 basis points expansion in operating margin.
- Diluted earnings per share rose by 24% year-over-year, exceeding expectations due to higher sales.
- The company achieved a record level of backlog exceeding $3.2 billion, providing strong visibility for the second half of 2024.
- Curtiss-Wright Corp (CW) raised its full-year guidance, expecting total sales growth of 6% to 8% and double-digit EPS growth.
Negative Points
- The company anticipates approximately $15 million in restructuring costs in 2024, which may impact short-term financial performance.
- There is a conservative outlook for the general industrial market, with expectations for flat sales growth due to weaker first-half performance.
- The Naval & Power segment's profitability is pressured by unfavorable mix and increased concentration of development programs.
- Curtiss-Wright Corp (CW) faces ongoing challenges with long lead times for older components in the supply chain.
- The company remains cautious about the commercial aerospace market, particularly concerning the 737 MAX program.
Q & A Highlights
Q: Supply chain has been a headwind for Defense Electronics in the past few quarters. Can you provide more color on where you are now on material receipts and shortages, and when you'd expect catch-up deliveries to level set?
A: The major disruptions are behind us, and we see good stability across our supply chain. Lead times have come down for various components, but older components remain at around 40 weeks. Prices have been stable, with only minor incremental increases. We believe we are level set with our customers in industrial businesses and commercial aerospace.
Q: Margins are at record levels. Can you talk about the rationale to implement restructuring plans now, and provide more details on your initiatives?
A: We are committed to growing operating income faster than sales. Some restructuring supports volume increases and aligns us for long-term growth. It's about driving efficiency and preparing for future growth, not just cost-cutting. The restructuring affects all three segments, with a focus on growth and efficiency.
Q: You had a strong quarter, especially on earnings. Is there anything unusual about the revenue growth cadence this year?
A: The improvement in the supply chain has had a significant effect, particularly in ground defense. We are taking a conservative view due to timing and restructuring. Some revenue timing in Naval & Power contributed to our beat this quarter, and we are cautious about commercial aerospace.
Q: Can you provide more color on the subsea pump opportunity and timeframe for commercialization?
A: We see strong demand for our reliable products in the subsea market. We anticipate $250 million in orders by the end of this decade, potentially doubling by the middle of the next decade. We are on track to deliver our first subsea pumping system by the end of this year.
Q: What are you seeing for pricing of new orders, and are there any LTAs that still need to be renegotiated?
A: Pricing is a constant exercise, and we are actively negotiating LTAs that expire at the end of this year. We are encouraged by the trajectory and improvement in orders, with a 24% increase in Defense Electronics orders in July.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
