Curtiss-Wright Corporation (CW) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A reveal strong financial performance, optimistic guidance, and strategic growth initiatives, particularly in Aerospace & Defense and Commercial Nuclear sectors. The increased EPS guidance and share repurchase plan further boost sentiment. Despite minor concerns like deceleration in defense revenue and supply chain challenges, the overall outlook is positive. The market is likely to react favorably, with potential for a stock price increase in the 2% to 8% range over the next two weeks.
Key Financial Performance
Sales (Q4 2025) $947 million, increased 15% year-over-year. Reasons: Strong organic growth of 11% and contribution from I&C Solutions acquisition. Aerospace & Defense markets grew 16% due to acceleration of ground and naval defense revenues. Commercial Aerospace sales increased more than 20%. Commercial markets grew 13% driven by higher revenues in power and process market.
Operating Income (Q4 2025) Increased 14%. Reasons: Higher R&D investments to drive future organic growth. Operating margin was 19.7%.
Diluted Earnings Per Share (Q4 2025) Grew 16% year-over-year. Reasons: Primarily driven by higher Aerospace & Defense sales.
Free Cash Flow (Q4 2025) $315 million, up 13%. Reasons: Reflected a 224% conversion.
New Orders (Q4 2025) Increased 18%. Reasons: Driven by solid demands within naval, defense, and commercial nuclear markets.
Revenue (Full Year 2025) Record performance with growth across all 3 segments. Reasons: Underlying demand and momentum across portfolio.
Operating Margin (Full Year 2025) 18.6%, up 110 basis points year-over-year. Reasons: Strong sales growth, operational excellence initiatives, and restructuring savings.
Diluted Earnings Per Share (Full Year 2025) Increased 21% year-over-year. Reasons: Improved operational performance and lower share count.
Adjusted Free Cash Flow (Full Year 2025) $554 million, record level. Reasons: Strong earnings growth and near-record working capital efficiency.
Order Book (Full Year 2025) $4.1 billion, up 10% year-over-year. Reasons: Strong demand in Aerospace & Defense and commercial markets.
Backlog (Full Year 2025) Increased 18% to over $4 billion. Reasons: Healthy growth in orders.
Share Repurchases (2025) $465 million, record level. Reasons: Disciplined capital allocation to enhance shareholder value.
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Operating Highlights
R&D Investments: Higher R&D investments were made to drive future organic growth, with a commitment to grow R&D faster than sales over time.
SMR Development: Continued ramp-up in development across several SMR designs, transitioning to initial prototype stages for critical systems on the X-Energy Advanced Reactor.
New Technologies: Investments in ruggedized computing solutions, Fabric100 products, and validation of ruggedized servers as part of Microsoft Azure ecosystem.
Aerospace & Defense (A&D) Markets: 16% growth in A&D markets driven by alignment to U.S. military priorities and NATO funding. Strong demand for Nuclear Propulsion Equipment and embedded computing solutions.
Commercial Markets: 13% growth in commercial markets, driven by higher revenues in power and process markets, and strong demand in commercial nuclear aftermarket equipment.
International Defense Markets: Mid-teens growth in direct foreign military sales, supported by NATO's increased defense spending commitments.
Operational Excellence Initiatives: Achieved 110 basis points margin expansion and record operating margin of 18.6% through operational excellence and restructuring actions.
Working Capital Efficiency: Near record levels of working capital efficiency achieved, contributing to strong free cash flow.
Pivot to Growth Strategy: Focused on delivering strong growth in sales, profitability, and free cash flow, with a record order book of $4.1 billion.
Capital Allocation: Executed $465 million in share repurchases and increased annual dividend for the ninth consecutive year.
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Risk or Challenges
Defense Electronics: Delays in orders for tactical communications equipment due to government shutdown and continuing resolution impacted timing of orders, leading to a more conservative 2026 guide in the ground defense market.
Ground Defense: Sales are expected to decline 4% to 6% in 2026 due to timing delays in orders and the acceleration of embedded computing revenues into 2025.
Naval Defense: Growth is partly offset by lighter-than-anticipated demand in aerospace and ground defense markets, which could impact overall performance.
General Industrial Market: Sales are expected to remain flat in 2026, with only modest growth in medium-duty industrial vehicle sales and cautious optimism for improvement.
Capital Expenditures: A nearly 50% increase in capital expenditures in 2025 and a further 25% increase in 2026 could strain financial resources, despite strong free cash flow.
Research and Development Investments: Higher R&D investments, while supporting future growth, could pressure operating margins in the short term.
Commercial Nuclear: While there is strong demand, the anticipated AP1000 order for reactor coolant pumps in 2026 is not yet included in the guidance, creating uncertainty.
Economic and Regulatory Environment: Potential risks from economic uncertainties and regulatory hurdles, particularly in the U.S. and international markets, could impact operations and strategic objectives.
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Guidance & Outlook
2026 Organic Sales Growth: Projected to grow by 6% to 8%, supported by a strong order book and continued investment in the business.
2026 Operating Income Growth: Anticipated to outpace sales growth, with an expected increase of 8% to 11%, and operating margin expansion of 30 to 60 basis points to range from 18.9% to 19.2%.
2026 Diluted EPS Growth: Expected to grow by 11% to 15%, reflecting strong operational performance and a reduction in share count.
2026 Free Cash Flow: Projected to reach a record $575 million to $595 million, with a free cash flow conversion rate of approximately 105%.
Aerospace Defense Sales Growth: Expected to grow by 9% to 11%, driven by alignment with the FY '26 U.S. defense budget and increased demand for secure embedded computing solutions.
Ground Defense Sales Outlook: Sales expected to decline by 4% to 6% due to timing delays in orders for tactical communications equipment, but growth anticipated in embedded computing and stabilization systems for international ground vehicles.
Naval Defense Sales Growth: Projected to grow by 5% to 7%, driven by higher revenues on CVN-81 aircraft carrier and Virginia-Class submarine programs.
Commercial Aerospace Sales Growth: Anticipated to grow by 10% to 12%, supported by a ramp-up in OEM production on narrow-body and wide-body aircraft.
Commercial Nuclear Market Growth: Expected to grow by mid-teens, driven by U.S. demand for plant life extensions, restarts, and SMR development transitioning to prototype stages.
Process Market Growth: Projected to grow by low double digits, driven by demand for severe service valves and instrumentation solutions.
General Industrial Market Outlook: Sales expected to remain flat in 2026, with modest growth in medium-duty industrial vehicle sales and potential improvement in overall conditions by 2027.
Segment-Specific Financial Outlook: Aerospace & Industrial: Sales growth of 5% to 7%, operating income growth of 11% to 14%, and margin expansion of 90 to 110 basis points. Defense Electronics: Sales growth of 4% to 6%, operating income growth of 4% to 6%, and margin expansion of up to 20 basis points. Naval & Power: Sales growth of 8% to 9%, operating income growth of 10% to 13%, and margin expansion of 30 to 50 basis points.
Capital Expenditures: Expected to increase by more than 25% year-over-year to $110 million to $120 million, following a nearly 50% increase in 2025, to support future growth.
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Shareholder Return Plan
Annual Dividend Increase: Curtiss-Wright increased its annual dividend for the ninth consecutive year in 2025.
Share Repurchase Program: Curtiss-Wright executed a record $465 million in total share repurchases in 2025.
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Key Q&A
Q:Can you provide more color regarding your exposure to missile programs and the potential opportunity in this growth vector?
A:Lynn Bamford explained that Curtiss-Wright has some content directly on missiles, such as telemetry and flight test instrumentation, but it is relatively minor. However, the company is well-positioned in areas like sensors, networking of sensors, and effectors related to defense systems, including the Golden Dome. They are engaged in exciting new developments and upgrades in these areas, both in the U.S. and Europe.
Q:Regarding the AP1000, which customer do you expect the 2026 order to come from, and how many are you expecting in this order?
A:Lynn Bamford stated that the first orders could come from either a European customer (Poland or Bulgaria) or the U.S. The size of the first order is uncertain and depends on Westinghouse's decisions. Financial impacts will depend on the timing of the order, with initial labor costs and material orders expected to start in 2026, leading to revenue uplift as the project progresses.
Q:Can you elaborate on the free cash flow guidance and the dynamics of working capital performance?
A:K. Farkas explained that working capital as a percentage of sales is targeted to improve to approximately 18% in 2026, a record low. This improvement is driven by commercial excellence, better contract negotiations, supply chain management, and enhanced systems for cash flow management. The company has also focused on improving collections, inventory turns, and DPO.
Q:Was the C-17 order booked in 4Q or 1Q, and what does it indicate about Defense Electronics bookings?
A:Lynn Bamford clarified that the C-17 order was booked in Q1 and is an example of delayed bookings from 2025 due to factors like the government shutdown. The order reflects a recovery in Defense Electronics bookings and aligns with expectations for improved order flow in 2026.
Q:Are the Naval & Power headwinds in 4Q structural or seasonal, and how should we think about them for 2026?
A:K. Farkas noted that the headwinds are tied to a mix of factors, including a ramp-up in Naval Defense and commercial nuclear projects. While some challenges exist due to prototyping work, the company expects benefits from MRO growth and global aftermarket content, which will support margins as production work increases.
Q:How should we think about operational and commercial excellence initiatives moving forward?
A:Lynn Bamford emphasized that operational and commercial excellence are integral to the company’s DNA, with ongoing efforts in pricing, supply chain management, and robotics integration. K. Farkas added that these initiatives contributed approximately $12 million to the P&L in 2025 and will continue to drive margin expansion in 2026, albeit at a slightly slower pace.
Q:Are there improvements in the underlying process markets, and how is Curtiss-Wright positioned?
A:K. Farkas stated that the company is seeing improvements in North America MRO and CapEx, particularly in oil and gas. The team has focused on customer satisfaction, lead times, and quality, which has helped gain market share and outperform industry growth rates.
Q:Why is there a deceleration in defense revenue growth in 2026 compared to prior years?
A:Lynn Bamford attributed the deceleration to timing issues, including delays caused by the government shutdown and CR. However, she expressed confidence in the company’s alignment with U.S. defense priorities and technologies, as well as foreign military sales. The company expects normal order flow to resume and highlighted its strong position in areas like Golden Dome and shipbuilding.
Q:What is driving the growth in new nuclear builds and SMR projects in 2026?
A:Lynn Bamford highlighted partnerships with Rolls-Royce, TerraPower, and others, as well as the transition of projects like X-Energy into prototyping. K. Farkas added that the company has content on other reactors like the APR1400 and is seeing order activity in South Korea, contributing to growth in new builds.
Q:Has the shipbuilding operating system powered by Palantir had any impact on Curtiss-Wright?
A:Lynn Bamford stated that the initiative is still in the forming stage and has not yet had an impact on Curtiss-Wright. However, discussions with Palantir have begun, and the company will participate as appropriate.
Q:Is Curtiss-Wright involved in the development of lunar nuclear reactors or nuclear propulsion in space?
A:Lynn Bamford mentioned that Curtiss-Wright works with microreactor providers and has capabilities relevant to space applications. While these opportunities are not as significant as AP1000 projects, they align with the company’s expertise in reliability and quality.
Q:Will there be more SMR content agreements announced in 2026?
A:Lynn Bamford confirmed that the company is expanding its content with SMR providers and expects to announce more agreements in 2026 as projects mature and customers allow public disclosure.
Q:What is the state of Curtiss-Wright’s supply chain, and are there M&A opportunities to address supply chain challenges?
A:Lynn Bamford noted that the supply chain remained stable in 2025, with watch items like high-bandwidth memory and rare earths. The company has implemented tools and centralized resources to manage supply chain performance. While M&A is not a high priority, it could be considered for global diversification or alignment with end markets.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the size of the first AP1000 order, citing Westinghouse's decision-making process. Additionally, they did not provide concrete information on the impact of the shipbuilding operating system powered by Palantir, as it is still in the forming stage.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AD market
Aerospace Defense
Aerospace market
Commercial Aerospace
Curtiss Wright
Defense market
Drive Stabilization
EM actuation
Full Conference
IC Solutions
NATO Allied
Process
RD Defense
Solutions acquisition
Stabilization Systems
Turret Drive
Wright Full
action investment
benefit excellence
commitment
condition vehicle
contribution IC
delay
digit
ground defense
outlook expectation
point outlook
process market
rate reduction
record level
sale benefit
saving action
segment Commercial
tax rate
CW Transcript
Curtiss-Wright Corporation (CW) Q4 2025 Earnings Call Transcript
Positive2-12
The earnings call summary and Q&A reveal strong financial performance, optimistic guidance, and strategic growth initiatives, particularly in Aerospace & Defense and Commercial Nuclear sectors. The increased EPS guidance and share repurchase plan further boost sentiment. Despite minor concerns like deceleration in defense revenue and supply chain challenges, the overall outlook is positive. The market is likely to react favorably, with potential for a stock price increase in the 2% to 8% range over the next two weeks.
Curtiss-Wright Corporation (CW) Presents at Baird 55th Annual Global Industrial Conference Transcript
Neutral11-12
Curtiss-Wright Corporation (CW) Q3 2025 Earnings Call Transcript
Positive11-6
The earnings call summary and Q&A reflect strong financial performance and optimistic guidance, with notable growth in defense and commercial nuclear sectors. Despite some uncertainties, the company's strategic focus on M&A, nuclear expansion, and partnerships suggests positive future prospects. The raised free cash flow guidance and operating margin expansion further support a positive sentiment.
Curtiss-Wright Corporation (CW) Presents At Morgan Stanley's 13th Annual Laguna Conference Transcript
Neutral9-11
CW Slides
Curtiss-Wright Q4 2025 slides: Record performance drives 7.5% stock surge2026-02-11
Curtiss-Wright Q3 2025 slides: strong performance drives raised guidance2025-11-05
Curtiss-Wright Q2 2025 slides: Double-digit growth drives raised full-year guidance2025-08-06
Curtiss-Wright Q1 2025 slides: Strong execution drives raised full-year guidance2025-05-07
CW Report
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