Executive Summary / Key Takeaways

• Curtiss-Wright's "Pivot to Growth" strategy is yielding strong results, driven by robust demand in Aerospace & Defense and Commercial Nuclear markets, operational excellence, and strategic acquisitions, positioning the company for accelerated profitable growth.
• The company delivered a strong Q1 2025 performance with 13% sales growth and 260 basis points of operating margin expansion, leading to a significant upward revision of full-year 2025 guidance across sales, operating margin, EPS, and free cash flow.
• Technological differentiation in embedded computing (MOSA, AI integration), nuclear safety systems, and emerging areas like subsea pumps and commercial aerospace avionics provides a competitive moat and fuels future organic growth opportunities.
• A record backlog exceeding $3.6 billion offers strong revenue visibility, particularly in defense and commercial nuclear, supporting confidence in achieving long-term growth targets despite macroeconomic uncertainties and potential tariff headwinds.
• Disciplined capital allocation, including strategic acquisitions like Ultra Energy and consistent share repurchases, leverages a strong balance sheet to enhance capabilities and deliver shareholder value.

The Engine of Growth: Curtiss-Wright's Strategic Power Play

Curtiss-Wright Corporation operates as a global integrated business, deeply embedded in critical Aerospace & Defense (AD) markets while also providing essential technologies to demanding commercial power, process, and industrial sectors. The company's strategic direction is firmly set on its "Pivot to Growth" strategy, a multi-faceted approach designed to accelerate organic expansion, enhance operational efficiency, expand margins, and generate robust free cash flow. This strategy is not merely theoretical; it is actively supported by targeted investments in technology, advanced systems, vital infrastructure, and its skilled workforce, all aimed at strengthening the company's foundation and aligning its capabilities with the most promising growth vectors across its diverse end markets.

The company's history is marked by strategic portfolio shaping through disciplined acquisitions. Key additions like PacStar bolstered its tactical communications offerings, providing a significant tailwind. More recently, the 2024 acquisitions of WSC Inc. and Ultra Energy have significantly expanded Curtiss-Wright's footprint and capabilities within the commercial nuclear and naval defense sectors. WSC brought simulation technology, enhancing offerings for power generation and process plants, while Ultra Energy added safety-critical nuclear products and sensors, notably strengthening ties to the UK nuclear submarine fleet and expanding reach among global Small Modular Reactor (SMR) designers. These strategic moves have broadened the company's product portfolio and global reach, particularly in high-priority markets.

Curtiss-Wright's operational prowess and technological leadership form the bedrock of its competitive position. In Defense Electronics, the company is a recognized leader in commercial off-the-shelf (COTS) embedded computing technology. Its alignment with the Modular Open Systems Approach (MOSA) and development of the Fabric 100 product line, which includes high-performance processors and network switches, accelerate the delivery of next-generation computing technologies for demanding applications like C5ISR programs. Integration of cutting-edge AI technology through partnerships, such as with NVIDIA (NVDA), into rugged deployable systems further differentiates its offerings, positioning Curtiss-Wright as a unique provider covering embedded computing, networking, and AI for the tactical edge.

Across its Naval Power and Commercial Nuclear segments, Curtiss-Wright provides highly engineered, safety-critical products designed for harsh environments. This includes naval nuclear propulsion equipment, specialized pumps, valves, and control systems for submarines and aircraft carriers, as well as essential components and services for commercial nuclear reactors globally. The recent Ultra Energy acquisition adds critical reactor protection and monitoring systems, leveraging Curtiss-Wright's UK manufacturing footprint. The company is also developing innovative solutions like subsea pumps, designed for extreme reliability in deep-sea oil and gas operations, with development milestones achieved and a potential market opportunity projected to reach $250 million in orders by the end of this decade, potentially doubling to over $500 million by the middle of the next. In commercial aerospace, the company's Fortress cockpit voice and data recorders are benefiting from new safety mandates, such as the FAA and EASA 25-hour recording requirement, creating a significant retrofit opportunity across thousands of aircraft in addition to new OEM installations. These technological advancements, supported by ongoing incremental R&D investments, are not just product features; they are critical differentiators that contribute to the company's competitive moat, enable higher margins, and are fundamental to its long-term growth strategy.

Competing in Critical Markets

Curtiss-Wright operates within competitive landscapes characterized by both large, diversified players and specialized niche providers. Key competitors include large conglomerates like Honeywell International (HON), General Dynamics (GD), RTX Corporation (RTX), and L3Harris Technologies (LHX), who compete across various segments, particularly in aerospace and defense electronics.

Compared to these larger rivals, Curtiss-Wright often excels in operational efficiency and profitability within its specific niches. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Curtiss-Wright's reported operating margin of 16.0% in Q1 2025, and a full-year 2024 margin of 17.4% to 17.6% (initial guide), compare favorably to the TTM operating margins of peers like GD (8%), RTX (8%), and LHX (9%), although Honeywell's TTM operating margin is closer at 20%. This suggests Curtiss-Wright's focused approach and operational excellence initiatives are effectively translating into stronger profitability within its core areas.

However, larger competitors like Honeywell and RTX benefit from greater scale and broader market diversification, which can offer advantages in supply chain resilience and the ability to pursue larger, integrated system contracts. General Dynamics' dominance in shipbuilding provides scale in naval programs that Curtiss-Wright supports as a critical component supplier. L3Harris is a significant player in defense electronics, competing directly in areas like communications and sensors.

Curtiss-Wright's competitive advantages lie in its deep domain expertise, the high reliability and performance of its engineered products for demanding applications (often exceeding industry standards in efficiency or durability), and its strong relationships with key customers, particularly in the U.S. Navy and commercial nuclear sector. Its technological edge, such as in MOSA-aligned embedded computing or safety-critical nuclear systems, provides a moat that is difficult for competitors to replicate quickly. While some competitors may offer lower upfront costs or faster innovation cycles in certain areas, Curtiss-Wright's focus on lifecycle value, reliability in harsh environments, and adherence to stringent regulatory standards allows it to command strong positioning and pricing power in its core markets. The company actively seeks opportunities to take market share, particularly in areas where competitors may face challenges or where the need to shore up the industrial base creates openings for proven suppliers.

Performance Reflecting Strategic Execution

Curtiss-Wright's recent financial performance underscores the effectiveness of its "Pivot to Growth" strategy and operational execution. In the first quarter of 2025, the company reported total net sales of $805.6 million, a significant 13% increase compared to the prior year period. This growth was broad-based, with Aerospace Industrial sales up 4% to $227.2 million, Defense Electronics sales surging 16% to $245.2 million, and Naval Power sales increasing 18% to $333.2 million.

This top-line momentum translated into substantial profitability gains. Operating income rose 34% year-over-year to $129.2 million, resulting in a notable 260 basis point expansion in the overall operating margin to 16.0%. This margin improvement was primarily driven by favorable absorption on higher sales volume across all segments, coupled with the benefits derived from the company's operational excellence initiatives and prior year restructuring actions. The Defense Electronics segment, in particular, delivered a record first quarter operating margin of 27.5%, benefiting from favorable mix towards higher-margin C5ISR programs. The Naval Power segment's margin also saw a benefit from the non-recurrence of an unfavorable contract adjustment from the prior year.

The company's strong order book further reinforces its growth trajectory. Total backlog reached a new record exceeding $3.6 billion as of March 31, 2025, providing significant visibility for future revenues. New orders in Q1 2025 increased 13% year-over-year to over $1 billion, resulting in a robust book-to-bill ratio of 1.26x. This demand was particularly strong in naval defense and commercial aerospace avionics, signaling continued momentum in key markets.

From a liquidity standpoint, Curtiss-Wright maintains a healthy balance sheet. While Q1 2025 saw a net decrease in cash and cash equivalents, this was primarily influenced by the repayment of $90 million in senior notes and increased cash used in investing activities related to the Ultra Energy acquisition. Operating cash flow, while typically an outflow in the first quarter, showed a year-over-year improvement. The company's strong free cash flow generation, highlighted by a record $483 million in adjusted free cash flow in 2024 with a 116% conversion rate, supports its capital allocation priorities. Management actively evaluates cash utilization, focusing on strategic acquisitions, consistent share repurchases (repurchasing $14 million in Q1 2025 and $250 million in FY 2024), and increasing dividends (eighth consecutive year of increases in 2024). The company remains in compliance with its debt covenants and possesses significant borrowing capacity, providing financial flexibility for future initiatives.

Outlook and Growth Catalysts

Building on its strong start to the year and robust backlog, Curtiss-Wright has confidently raised its full-year 2025 guidance. The company now expects total sales to increase 8% to 9% year-over-year, reflecting organic growth of 5% to 7% plus the contribution from acquisitions. This improved outlook is driven by increased confidence across the majority of its Aerospace & Defense markets, where total sales are projected to grow 7% to 9%. Specific market growth expectations include 6% to 8% in Aerospace Defense, 6% to 8% in Ground Defense, and 5% to 7% in Naval Defense. Commercial Markets are also expected to contribute, with total sales growth targeted at 9% to 11%, including 16% to 18% growth in Power and Process, offsetting flat expectations in General Industrial.

Profitability is expected to see significant expansion, with operating margin projected to increase 80 to 100 basis points, reaching a range of 18.3% to 18.5%. This anticipated improvement is fueled by favorable absorption on higher sales, the benefits of operational excellence initiatives, and savings from the 2024 restructuring program. The Defense Electronics segment is a key driver of this margin expansion, with its operating margin expected to increase 140 to 160 basis points to a new high of 26.3% to 26.5%. Overall operating income is expected to grow 13% to 16%.

This strong top- and bottom-line performance is projected to translate into diluted EPS growth of 14% to 17%, with a guidance range of $12.45 to $12.80. Free cash flow is also expected to see substantial growth, with the outlook raised to $495 million to $515 million, representing a 27% increase over 2024 and a healthy conversion rate exceeding 105%. This includes planned incremental capital expenditures to support future growth initiatives.

Key catalysts underpinning this positive outlook include continued strong demand for naval nuclear propulsion equipment on U.S. Navy submarine and aircraft carrier programs, increased global defense spending driving demand for embedded computing and tactical communications equipment, and the ramp-up in commercial aerospace production complemented by new opportunities like the 25-hour cockpit recorder mandate. In commercial nuclear, the momentum from plant life extensions, aftermarket services, and the acceleration of SMR and advanced reactor development (including partnerships with X-energy, TerraPower, and Westinghouse) presents a significant long-term growth runway, with the business targeting $1.5 billion in annual revenues by the middle of the next decade.

Risks and Considerations

Despite the positive outlook, potential risks warrant consideration. Macroeconomic uncertainties, including inflation, interest rates, and labor availability, could impact operational costs and demand in certain commercial markets, particularly General Industrial. Geopolitical conflicts and related sanctions could affect international sales or supply chains.

Potential tariff impacts, estimated at approximately $30 million gross for the remainder of 2025, primarily from imports from China, pose a headwind. However, management has implemented mitigation strategies, including pricing and operational adjustments, aiming to reduce the net impact to approximately $10 million. The ongoing U.S. government budget process, including potential Continuing Resolutions, could delay new program starts, although the company's strong backlog provides near-term insulation.

While the company maintains insurance and believes material liability is unlikely, legal proceedings related to asbestos and environmental exposures are ongoing. Execution risk exists in integrating recent acquisitions and realizing anticipated synergies and growth opportunities, particularly with Ultra Energy which is initially dilutive to margin. Successful execution on large development programs like SMRs and subsea pumps is crucial for realizing their significant long-term revenue potential.

Conclusion

Curtiss-Wright is executing effectively on its "Pivot to Growth" strategy, leveraging its deep expertise, differentiated technology, and strong market positions to drive profitable growth. The robust performance in Q1 2025 and the subsequent upward revision of full-year guidance underscore the momentum building across its core Aerospace & Defense and Commercial Nuclear markets. A record backlog provides excellent visibility, while strategic investments in technology and targeted acquisitions are expanding capabilities and opening new avenues for future growth in areas like SMRs, subsea pumps, and advanced avionics.

While macroeconomic uncertainties and potential tariff impacts present challenges, the company's proven ability to navigate disruptive environments through operational excellence and proactive mitigation strategies provides confidence in its resilience. Curtiss-Wright's strong balance sheet and disciplined capital allocation further support its ability to pursue growth opportunities and deliver value to shareholders. For investors, Curtiss-Wright represents a compelling opportunity aligned with secular growth trends in global defense spending, energy independence, and critical infrastructure, powered by a commitment to technological leadership and operational execution. Monitoring the progress of key development programs, the effectiveness of tariff mitigation, and the integration of recent acquisitions will be crucial in assessing the company's continued trajectory towards its long-term financial targets.