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Curtiss-Wright (CW) Up 1.5% 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 1.5% 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 drivers.

Curtiss-Wright Q2 Earnings Top Estimates, EPS View Raised

Curtiss-Wright reported second-quarter 2021 adjusted earnings of $1.56 per share, which surpassed the Zacks Consensus Estimate of $1.53 by 2%. Moreover, the bottom line grew 22% on a year-over-year basis.

Excluding one-time items, the company reported GAAP earnings of $1.49 per share compared with 74 cents reported in the year-ago quarter.

Operational Performance

In the quarter under review, the company’s total sales of $621 million increased 13% year over year. The top line also exceeded the Zacks Consensus Estimate of $590 million by 5.4%.

The company reported adjusted sales of $609.4 million, which went up 14% year over year.

Gross profit increased 20.8% year over year to $224.7 million. Operating income of $94.6 million improved 70.8% from $55.4 million a year ago.

Curtiss-Wright’s total backlog at the end of the second quarter of 2021 was $2.2 billion. New orders of $679 million increased 11% from the prior-year period, driven by strong demand observed in the company’s Commercial markets, most notably for industrial vehicle product.

Segmental Performance

Aerospace & Industrial: Adjusted sales in this segment improved 17% year over year to $193.3 million, primarily attributable to strong industrial vehicle demand for on- and off-highway platforms, and higher sales of surface treatment services due to improving economic conditions.

While adjusted operating income increased 138% to $30.5 million, operating margin expanded 800 basis points (bps) to 15.7%. The upside was driven by strong absorption on higher general industrial market sales, and the benefits of the company’s ongoing operational excellence and prior year restructuring initiatives.

Defense Electronics: Adjusted sales in this segment grew 17% year over year to $163.4 million. This uptick can be attributed to driven by the contribution from the PacStar acquisition for tactical battlefield communications equipment within the company’s ground defense market.

Adjusted operating income declined 8% to $30.8 million and adjusted operating margin contracted 510 bps to 18.9%. The downside can be attributed to unfavorable mix in defense electronics and $4 million in higher research and development investments.

Naval & Power: Adjusted sales in this segment improved 11% year over year to $252 million on account of higher production revenues on the CVN-80 and CVN-81 aircraft carrier programs. Higher revenues from increased nuclear aftermarket maintenance supporting existing operating reactors, as well as higher industrial valve revenues to the oil and gas market also contributed to this unit’s sales growth.

While operating income rallied 13% to $43.5 million, the operating margin expanded 30 bps to 17.2%. The upside was primarily driven by solid absorption on higher revenues, as well as the benefits of its prior year restructuring initiatives.

Financial Update

Curtiss-Wright ended the second quarter of 2021 with cash and cash equivalents of $197.5 million, down 26% from $198.2 million as of Dec 31, 2020.

Long-term debt was $967.5 million as of Jun 30, 2021, compared with $958.3 million as of Dec 31, 2020.

Operating cash flow totaled $75.1 million at the end of second-quarter 2021 compared with $140.4 million in the prior-year period.

Adjusted free cash flow at the end of the reported quarter was $65.8 million compared with the year-ago period’s $135.8 million.

Guidance 2021

Curtiss-Wright increased its financial guidance for 2021. The company now expects adjusted earnings in the range of $7.15-$7.35 per share, compared with prior guidance range of $7.10-$7.30 per share.

The Zacks Consensus Estimate for the company’s full-year earnings is pegged at $7.30 per share, which lies above the midpoint of the company’s guided range.

The company currently expects to generate sales in the range of $2,465-$2,515 million in 2021, compared with the earlier guided range of $2,450-$2,500 million. The Zacks Consensus Estimate for its full-year sales is pegged at $2,500 million, above the midpoint of the company-guided range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Curtiss-Wright has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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