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Curtiss-Wright (CW) Up 5.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Curtiss-Wright (CW - Free Report) . Shares have added about 5.5% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Curtiss-Wright Q2 Earnings and Sales Beat Estimates

Curtiss-Wright reported second-quarter 2020 adjusted earnings of $1.31 per share, which surpassed the Zacks Consensus Estimate of $1.29 by 1.6%. The bottom line, however, declined 31% from $1.90 in the prior-year quarter.

Excluding one-time items, GAAP earnings came in at 74 cents per share, down 60% from $1.86 registered in the year-ago quarter.

Operational Performance

In the quarter under review, the company’s total sales of $550 million declined 14% year over year. The top line, however, surpassed the Zacks Consensus Estimate of $544 million by 1.1%.

Gross profit declined 19% year over year to $186 million. Operating income of $55.3 million plunged 48% from $105.7 million a year ago.

Curtiss-Wright’s total backlog at the end of the second quarter was $2.2 billion, increasing 1% from Dec 31, 2019. New orders of $620 million were up 3%, led by strong growth in naval defense.

Segmental Performance

Commercial/Industrial: Sales in this segment decreased 27% year over year to $213.6 million. The decline in sales was primarily due to reduced demand resulting from the impact of the COVID-19 pandemic, alongside lower commercial aerospace market revenues and reduced general industrial market sales.

While operating income plunged 72% to $14.4 million, operating margin contracted 720 basis points (bps) to 10.3%.

Defense: Sales at this segment improved 7% year over year to $170 million. This can be attributed to higher sales of embedded computing equipment on various Intelligence, Surveillance and Reconnaissance (ISR) programs, including fighter jets and Unmanned Aerial Vehicle (UAV) platforms.

Meanwhile, adjusted operating income declined 15% to $27.9 million, whereas adjusted operating margin expanded 60 bps to 21.6%.

Power: Sales at this segment declined 11% year over year to $166.4 million on account of lower naval defense market revenues and reduced power generation market sales.

While adjusted operating income fell 34% to $21.3 million, operating margin contracted 100 bps to 16.7%.

Financial Update

Curtiss-Wright ended second-quarter 2020 with cash and cash equivalents of $155.4 million, down 60% from $391 million as of Dec 31, 2019. Long-term debt summed $834.8 million compared with $760.6 million as of Dec 31, 2019.

Net cash flow from operating activities amounted to $140.4 million at the end of second-quarter 2020, up from $92.2 million a year ago.

Adjusted free cash flow at the end of the quarter was $130 million, up 71% compared to the prior-year period. During the second quarter, the company repurchased 132,443 shares of its common stock for approximately $13 million.

2020 Guidance

Curtiss-Wright reiterated its financial guidance for 2020. The company continues to expect adjusted earnings of $6.60-$6.85 per share. The Zacks Consensus Estimate for the company’s full-year earnings is pegged at $6.38, below the company’s guidance range.

Apart from this, Curtiss-Wright continues to expect adjusted free cash flow in the range of $350-$380 million for the current year.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -7.77% due to these changes.

VGM Scores

At this time, Curtiss-Wright has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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.


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