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Curtiss-Wright (CW) Up 3.6% 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 3.6% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Curtiss-Wright Beats on Q1 Earnings, Raises 2019 View

Curtiss-Wright Corporation reported first-quarter 2019 adjusted earnings of $1.30 per share, which surpassed the Zacks Consensus Estimate of $1.17 by 11.1%.

Excluding one-time items, the company reported GAAP earnings of $1.29 per share, up 31.6% from 98 cents registered in the year-ago quarter. The year-over-year upside in the bottom line can be attributed to higher operating income, lower interest expense and a lower tax rate as well as a lower share count.

Operational Performance

In the quarter under review, the company’s total sales of $578.3 million increased 6% year over year. The top line, however, missed the Zacks Consensus Estimate of $580 million by a whisker.

Gross profit increased 9% year over year to $381.4 million. Operating income of $72 million improved 12% from $366.3 million a year ago.

Curtiss-Wright’s total backlog at the end of the first quarter 2019 was $2.2 billion, up 7% from the figure registered in December 2018. New orders also surged 23% to $747 million.

Segmental Performance

Commercial/Industrial: Sales at this segment slipped 1% year over year to $293.5 million. Higher OEM sales of sensors products offset by lower actuation revenues due to the delayed signing of a new supply agreement and lower FAA directives were the primary reasons behind this almost flat sales in the reported quarter.

While operating income inched up 1% to $39.4 million, operating margin contracted 20 basis points (bps) to 13.4%. The improvement in the operating income was driven by higher sales and favorable overhead absorption from industrial valve and sensors products.

Defense: Sales at this segment rose 2% year over year to $121 million. This uptick can be attributed to higher sales from various helicopter programs, embedded computing equipment on the Virginia class submarine program. Also, higher sales from avionics and electronics equipment on various domestic and international platforms contributed to this unit’s top line.

Meanwhile, adjusted operating income declined 8% to $18.1 million and adjusted operating margin contracted 170 bps to 14.9%. The downside can be attributed to unfavorable mix for the company’s defense electronics products.

Power: Sales at this segment surged a solid 24% year over year to $163.8 million on account of higher Virginia class submarine and CVN-80 aircraft carrier revenues as well as solid DRG service center revenues. Notably, increased domestic aftermarket sales led to this upside.

While operating income increased 58% to $24.2 million, operating margin expanded 320 bps to 14.8%. Both the upsides were driven by favorable overhead absorption on higher naval defense revenues and increased profitability from the China Direct AP1000 program.

Financial Update

Curtiss-Wright ended the first quarter of 2019 with cash and cash equivalents of $154.4 million, down 44% from $276.1 million as of Dec 31, 2018. Long-term debt summed $761.9 million compared with $762.3 million as of Dec 31, 2018.

Operating cash outflow from continuing operations totaled $51.9 million at the end of first quarter 2019 compared with $71.3 million in the prior year.

Adjusted free cash flow at the end of the reported quarter was $63.8 million compared with the year-ago figure of $30.2 million. During the first quarter, the company repurchased 0.1 million shares worth $12 million.

Guidance

Curtiss-Wright raised its financial guidance for 2019. The company currently expects to generate adjusted earnings of $7.00-$7.05 per share, up from $6.80-$6.95 projected earlier. The Zacks Consensus Estimate for the company’s 2019 earnings is pegged at $6.90, below the company’s provided guidance range.

The company now projects its full-year sales to be in the range of $2,510-$2,535 million compared with the earlier guidance of $2,490-$2,535 million. For full-year sales, the Zacks Consensus Estimate stands at $2.51 billion, which is in line with the midpoint of the company’s projected view.

Additionally, Curtiss-Wright has raised its adjusted free cash flow forecast from $320-$330 million to $330-$340 million for 2019.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Curtiss-Wright has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Curtiss-Wright has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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