Company History and Overview

Curtiss-Wright's origins can be traced back to 1929 when it was founded through the merger of the Curtiss Aeroplane and Motor Company and the Wright Aeronautical Corporation. The company's early years were marked by its involvement in the development of some of the most iconic aircraft in aviation history, including the P-40 Warhawk and the P-63 Kingcobra during World War II.

During World War II, Curtiss-Wright made significant contributions to the war effort, producing critical components and systems for military aircraft, ships, and vehicles. In the post-war period, the company faced challenges as the commercial aviation and defense markets underwent significant changes. To address these challenges, Curtiss-Wright implemented a series of restructuring initiatives in the 1970s and 1980s to streamline its operations and strengthen its financial position. This included divesting non-core businesses and focusing on its core competencies in aerospace, defense, and industrial markets.

Through the 1990s and 2000s, Curtiss-Wright continued to evolve, making strategic acquisitions to expand its product portfolio and geographic reach. Key milestones included the acquisitions of PRC in 1997 and META in 2007, which significantly bolstered the company's defense electronics capabilities. Curtiss-Wright also invested heavily in research and development to maintain its technological edge and develop innovative solutions for its customers.

Over the decades, Curtiss-Wright has strategically expanded its footprint beyond the aerospace industry, leveraging its engineering prowess to diversify into critical markets such as naval defense, commercial nuclear power, and industrial automation. Today, the company operates through three reportable segments: Aerospace & Industrial, Defense Electronics, and Naval & Power.

The Aerospace & Industrial segment provides a diverse offering of highly engineered products and services supporting critical applications primarily across the commercial aerospace and general industrial markets, as well as the defense markets. This includes electronic throttle control devices, sensors, electro-mechanical actuation control components, and surface treatment services such as shot peening and laser peening.

The Defense Electronics segment primarily serves the defense markets, providing products such as commercial off-the-shelf (COTS) embedded computing board-level modules, integrated subsystems, tactical communications solutions, and aircraft data management solutions. The segment also caters to the commercial aerospace market with avionics and electronics offerings.

The Naval & Power segment is focused on the naval defense and power process markets, providing products like main coolant pumps, power-dense compact motors, generators, valves, and spent fuel management products for the commercial nuclear power industry. The segment also supplies aircraft arresting systems equipment to the aerospace defense market.

Financial Performance and Key Metrics

Over the past three years, Curtiss-Wright has delivered strong financial results, demonstrating the resilience and flexibility of its diversified business model. In 2024, the company reported record revenue of $3.12 billion, up 10% year-over-year, driven by double-digit growth across its A&D and commercial markets. This top-line performance translated into a 9% increase in operating income to $529 million, resulting in a diluted earnings per share (EPS) of $10.55, a 14% year-over-year improvement.

Curtiss-Wright's financial position remains robust, with a healthy balance sheet and strong cash flow generation. In 2024, the company reported free cash flow of $483 million, reflecting a conversion rate of 116% of net income. This allowed Curtiss-Wright to continue investing in strategic initiatives, while also returning capital to shareholders through share repurchases and dividend payments.

Key financial metrics for Curtiss-Wright as of the latest reported period include:

• Revenue: $3.12 billion (FY 2024)

• Net Income: $405 million (FY 2024)
• Diluted EPS: $10.55 (FY 2024)
• Free Cash Flow: $483 million (FY 2024)
• Debt-to-Equity Ratio: 0.49 (FY 2024)
• Return on Equity: 16.6% (FY 2024)

Financials

Curtiss-Wright's financial performance has been consistently strong, as evidenced by its record revenue and earnings growth in recent years. The company's diversified business model and focus on high-value, mission-critical products and services have contributed to its ability to generate stable cash flows and maintain a solid financial position.

In the most recent fiscal year (2024), Curtiss-Wright reported revenue of $3.12 billion, net income of $405 million, operating cash flow of $544 million, and free cash flow of $483 million. The company's performance exceeded expectations, with double-digit growth in sales and operating income. Diluted earnings per share reached $10.90, representing a 16% increase year-over-year.

For the most recent quarter (Q4 2024), Curtiss-Wright reported revenue of $824 million, an increase of 4.9% year-over-year, driven by better-than-expected performance in the Defense Electronics and Naval & Power segments. Net income for the quarter was $118 million.

Geographically, approximately 27% of total net sales in 2024 were to customers outside of the United States, highlighting the company's global presence and diversification.

Liquidity

The company's liquidity position remains robust, supported by its strong cash flow generation and prudent financial management. Curtiss-Wright's healthy balance sheet and access to credit facilities provide it with ample financial flexibility to pursue strategic growth initiatives and navigate potential market uncertainties.

As of December 31, 2024, Curtiss-Wright reported the following liquidity metrics:

• Debt-to-Equity ratio: 0.49

• Cash and cash equivalents: $385 million
• Available credit line: $729 million under the $750 million revolving credit facility
• Current ratio: 1.69
• Quick ratio: 1.19

These figures demonstrate Curtiss-Wright's strong financial position and ability to meet its short-term obligations while maintaining flexibility for future growth opportunities.

Segment Performance and Outlook

Aerospace & Industrial Segment

The Aerospace & Industrial segment delivered a strong performance in 2024, with sales increasing 5% year-over-year to $932 million. This was driven by higher sales in the commercial aerospace and aerospace defense markets, which offset a decline in the general industrial market. The segment's operating margin remained healthy at 15.9%, despite headwinds from restructuring costs and increased R&D investments.

In the commercial aerospace market, sales increased by $43 million, or 13%, driven by higher OEM sales of sensors and actuation products, as well as surface treatment services, on narrowbody and widebody platforms. The aerospace defense market benefited from a $15 million, or 8%, increase in sales, primarily due to higher actuation development and production on various fighter jet programs. However, the general industrial market experienced a decline of $18 million, or 4%, due to lower sales of industrial vehicle products to off-highway vehicle platforms.

Operating income for the segment increased by 2% to $148 million, while operating margin decreased by 50 basis points to 15.9%. The increase in operating income was driven by favorable overhead absorption on higher sales, which was partially offset by restructuring costs and higher investment in research and development during the current period.

New orders in the Aerospace & Industrial segment increased by 10% to $982 million, primarily due to an increase in orders for surface treatment services within the aerospace defense markets. The segment's backlog as of December 31, 2024 was $434 million, up 12% from the prior year.

Looking ahead, Curtiss-Wright expects the Aerospace & Industrial segment to grow sales by 3-5% in 2025, primarily due to continued strength in commercial aerospace. The company also anticipates margin expansion of 40-60 basis points, as the benefits of its restructuring initiatives and operational excellence programs take hold.

Defense Electronics Segment

The Defense Electronics segment experienced a 12% year-over-year increase in sales to $911 million in 2024, fueled by robust demand across ground defense, aerospace defense, and commercial aerospace markets. Operating margin for the segment expanded 120 basis points to 24.7%, reflecting favorable overhead absorption on higher sales.

The growth in this segment was driven by a $47 million, or 15%, increase in the ground defense market, primarily due to higher demand for tactical battlefield communications equipment. The aerospace defense market also saw a $42 million, or 13%, increase in sales, mainly from higher demand for embedded computing equipment on various helicopter and fighter jet programs. Additionally, the commercial aerospace market benefited from a $10 million, or 3%, increase in sales, primarily from higher OEM demand for avionics and electronics on various platforms.

Operating income in the Defense Electronics segment increased by 17% to $225 million, and operating margin improved by 120 basis points to 24.7%. The increase in operating income and margin was primarily due to favorable overhead absorption on the higher sales within the aerospace and defense markets.

New orders in the Defense Electronics segment increased by 13% to $1.06 billion, primarily due to an increase in orders for avionics and embedded computing equipment. The segment's backlog as of December 31, 2024 was $987 million, up 11% from the prior year.

For 2025, Curtiss-Wright expects the Defense Electronics segment to deliver 7-9% sales growth, supported by its record 2024 order book. Operating margin is projected to reach a new all-time high of 25-25.2%, despite a modest headwind from increased R&D investments.

Naval & Power Segment

The Naval & Power segment was a standout performer in 2024, with sales increasing 12% year-over-year to $1.28 billion. This was driven by higher demand across naval defense, commercial nuclear, and aerospace defense markets. Operating margin for the segment was 15.6%, impacted by an unfavorable contract adjustment and product mix.

The naval defense market saw a $95 million, or 13%, increase in sales, primarily due to higher demand and timing of sales on various submarine programs, as well as higher foreign military sales. The power process market also experienced a $33 million, or 6%, increase in sales, primarily driven by higher commercial nuclear aftermarket sales supporting the maintenance of operating reactors in North America, partially offset by the wind-down on the China Direct AP1000 program. The aerospace defense market contributed a $7 million, or 6%, increase in sales, primarily due to higher demand for arresting systems equipment supporting various domestic customers.

Operating income in the Naval & Power segment increased by 6% to $200 million, while operating margin decreased by 100 basis points to 15.6%. The increase in operating income was driven by favorable overhead absorption on higher sales and the absence of first-year purchase accounting costs from the 2023 arresting systems acquisition, which was partially offset by an unfavorable naval contract adjustment and unfavorable product mix.

New orders in the Naval & Power segment increased by 32% to $1.66 billion, primarily due to an increase in naval defense orders supporting aircraft carrier and submarine programs. The segment's backlog as of December 31, 2024 was $2.03 billion, up 27% from the prior year.

Looking ahead, Curtiss-Wright expects the Naval & Power segment to generate 10-11% sales growth in 2025, including a contribution from the recently acquired Ultra Energy business. Operating margin is anticipated to expand by 50-70 basis points, as the company benefits from favorable absorption on higher organic sales and the integration of Ultra Energy.

Diversification and Growth Opportunities

Curtiss-Wright's diversified business model has been a key driver of its consistent performance, mitigating the impact of cyclicality in any single end market. The company's strategic focus on aligning its technologies with secular growth trends in areas like commercial nuclear power, defense electronics, and industrial automation has positioned it well for the future.

In the commercial nuclear power market, Curtiss-Wright is poised to capitalize on the global push for carbon-free energy and energy independence. The company's recent acquisition of Ultra Energy, a leading provider of reactor protection systems and advanced instrumentation, further strengthens its position in this growing market. Curtiss-Wright expects its commercial nuclear business to grow fivefold by the middle of the next decade, reaching an annual run rate of $1.5 billion.

The company's Defense Electronics segment continues to benefit from increased global defense spending, particularly in areas like C5ISR (Command, Control, Computers, Communications, Cyber, Intelligence, Surveillance and Reconnaissance), electronic warfare, and tactical communications. Curtiss-Wright's strong presence on critical defense platforms and its expertise in COTS-based solutions position it as a key partner for the U.S. military and its allies.

In the Aerospace & Industrial segment, Curtiss-Wright is well-positioned to capitalize on the recovery in commercial aerospace, as well as the ongoing trends of electrification and automation in the general industrial market. The company's sensor, actuation, and surface treatment technologies are in high demand across a diverse set of end markets.

Risk Factors and Challenges

While Curtiss-Wright's diversified business model provides resilience, the company is not immune to broader macroeconomic and industry-specific challenges. Some of the key risks facing the company include:

1. Geopolitical tensions and changes in defense spending: A significant portion of Curtiss-Wright's revenue is derived from defense-related activities, which can be impacted by shifts in government defense budgets and policies.

2. Supply chain disruptions and cost inflation: The company's operations and profitability can be affected by supply chain constraints, labor shortages, and rising costs of raw materials and other inputs.

3. Regulatory and compliance risks: As a government contractor, Curtiss-Wright must navigate a complex regulatory environment, which can expose the company to potential fines, penalties, or contract terminations.

4. Technological disruption and competition: The company operates in highly competitive markets, where the ability to develop and commercialize innovative products is crucial to maintaining a competitive edge.

5. Integration challenges: Curtiss-Wright's growth strategy includes selective acquisitions, which can pose integration risks and potentially disrupt the company's operations if not executed effectively.

Curtiss-Wright's management team has demonstrated its ability to navigate these challenges, as evidenced by the company's strong financial performance during the COVID-19 pandemic and other periods of market volatility. However, ongoing vigilance and proactive risk management will be critical to the company's continued success.

Industry Trends and Outlook

The global aerospace and defense industry is projected to grow at a compound annual growth rate (CAGR) of 5-7% over the next five years. This growth is expected to be driven by increased defense spending, commercial aircraft production, and expansion in the nuclear power market. These trends align well with Curtiss-Wright's core competencies and market positioning.

For 2025, Curtiss-Wright is projecting mid-single-digit organic sales growth and total growth of 7-8%, including acquisitions. The company expects operating income growth to exceed sales growth, resulting in 40-60 basis points of operating margin expansion to 18% at the midpoint. Curtiss-Wright anticipates double-digit growth in diluted EPS, with a guidance range of $12.10 to $12.40, up 11-14% year-over-year.

In terms of cash flow, Curtiss-Wright is projecting free cash flow of $485 million to $505 million in 2025, reflecting a conversion rate in excess of 105%. This strong cash generation will provide the company with flexibility to invest in growth initiatives, pursue strategic acquisitions, and return capital to shareholders.

Segmentally, Curtiss-Wright expects the following performance in 2025:

• Aerospace & Industrial segment: Sales growth of 3-5% and operating margin expansion of 40-60 basis points.

• Defense Electronics segment: Sales growth of 7-9% and operating margin expansion of 10-30 basis points.
• Naval & Power segment: Sales growth of 10-11% (3-5% organic) and operating margin expansion of 50-70 basis points.

The newly acquired Ultra Energy business is expected to generate high single-digit revenue growth and a low double-digit operating margin in 2025, further strengthening Curtiss-Wright's position in the commercial nuclear power market.

Conclusion

Curtiss-Wright Corporation is a diversified industrial conglomerate with a rich history and a proven track record of delivering consistent growth and shareholder value. The company's strategic focus on aligning its technologies with key secular trends, coupled with its strong market positions and operational excellence, positions it well for the future.

Despite the various risks and challenges facing the company, Curtiss-Wright's diversified business model, robust financial position, and experienced management team instill confidence in its ability to navigate the ever-evolving business landscape. As the company continues to execute on its Pivot to Growth strategy, investors can look forward to Curtiss-Wright's continued contribution to the aerospace, defense, and critical industrial sectors.

The company's strong performance in 2024, coupled with its positive outlook for 2025, demonstrates the effectiveness of its strategic initiatives and the resilience of its business model. With a record order book, expanding margins, and a focus on high-growth markets, Curtiss-Wright is well-positioned to capitalize on the favorable trends in its key end markets and deliver long-term value to its shareholders.