CURTISS WRIGHT Q1 FY26 earnings call CW

Curtiss-Wright delivered Q1 sales of $914 million, up 13% YoY, with higher revenue across all major end markets and operating income growth outpacing sales in every segment, producing 100 bps of overall margin expansion to 17.6%. Diluted EPS grew 23%, primarily driven by strong A&D sales. New orders rose 15% for a 1.3x book-to-bill with mid-teens order growth in each of the three segments, lifting backlog to a new record of nearly $4.3 billion. Management raised the full-year outlook for sales, operating margin, EPS and free cash flow, expressing confidence in exceeding Investor Day targets.

The Defense Electronics segment delivered its best performance since Q3 2024 as it moved past delays from the prior continuing resolution and 2025 government shutdown; Q1 sales rose 5% (slightly ahead of plan) with a record-caliber 28.1% operating margin, up 60 bps. Wins spanned C-17 cockpit modernization mission-computer upgrades, next-generation helicopter platform awards, and short-cycle tactical communications. The Q1 order book was up 18% YoY at a book-to-bill near 1.1x, and April orders were up 46% YoY. Because many affected businesses are short-cycle, management expects to convert delayed orders to revenue quickly, though it flagged Q2 revenue pressure and kept the ground-defense outlook unchanged, still taking a conservative stance in tactical communications.

Naval & Power grew sales 21%, exceeding expectations, on an accelerated submarine production ramp plus aftermarket uplift from naval shipyard fleet services and overhaul work; operating income grew 33% for 140 bps of margin expansion, and the segment posted a 1.5x book-to-bill. Power & process revenue grew high teens, led by commercial nuclear maintenance and life extensions across North America and increased advanced SMR revenue. Management cited 23 US reactors now approved for subsequent license renewal (up from 9 at the start of last year), Canadian major-component-replacement modernization, expected new-build AP1000 support, and content on leading 300MW-plus SMR designs including the X-energy advanced reactor.

Curtiss-Wright transitioned from design to prototype manufacturing of both the helium circulator and the reactivity control and shutdown systems for the X-energy Advanced Reactor. Total content is ~$120 million per reactor, though only two of three major subsystems have moved to prototyping and not the full reactor complement, so recognized content is below that figure. Within the mid-to-high-teens commercial nuclear guide, aftermarket runs ~low double digits while SMR ramps sharply; SMR was ~10% of commercial nuclear revenue last year and is targeted at ~12% this year. Management framed SMR as a meaningful and growing revenue contributor in 2026 and beyond, with margin uplift as work moves from lower-margin design to prototyping and eventually early production later this decade.

A&I sales grew 12%, exceeding expectations, driven by its defense markets — higher actuation and sensor sales on US/European fighter jets and EM actuation for ground-based mobile launchers — with solid commercial aerospace OEM growth on narrow-body and wide-body platforms and mid-single-digit general-industrial growth on improving industrial-vehicle demand. Operating income grew 24% and margin expanded 150 bps on favorable absorption, restructuring savings and favorable mix. Management noted increased EM actuation for the US Army's IFPC program (procurement more than doubled YoY and expected to nearly double again in 2027) and Turret Drive stabilization demand through its Rheinmetall relationship.

Management reaffirmed acquisitions as the top capital-allocation priority, noting ~$2.5 billion deployed toward acquisitions since the pivot to growth while leverage is approaching record lows with a fully untapped revolver and $3 billion of borrowing capacity. Defense Electronics remains the top target area (citing the successful PacStar integration), alongside critical aerospace technologies bridging commercial and military markets and commercial nuclear, where targets are scarcer. The CFO cautioned that scarcity of high-quality strategic assets is driving elevated multiples, and the company is stringently applying strategic and financial filters, seeking deals accretive to core KPIs (revenue, operating margin, EPS, FCF, ROIC) over time^⏳.

Management highlighted proactive management of semiconductor memory/storage chip supply — funding suppliers, leveraging government high-priority ratings, and advanced buys — expressing confidence needs for 2026 are in hand and focus has shifted to 2027; rare earth minerals (surface tech and industrial) are a second watch item addressed via alternative minerals and second-sourcing. On demand, management cited technologies on over 400 platforms and 3,000 programs worldwide, a ~$1 trillion FY26 NDAA base rising to a $1.5 trillion President's budget request, accelerated US Navy production including next-gen SSN(X), and rising NATO defense spending.