Curtiss-Wright's Earnings Call Contradictions: Industrial Vehicles Growth Doubt, AP1000 Revenue Timing, M&A Priorities Clash

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $924 million, grew 5% year-over-year
• EPS: $15.10-$15.40 projected for full year 2026, up 14%-16% YOY
• Operating Margin: 19.4%, driving 110 basis points of operating margin expansion YOY

Guidance:

• Full-year sales projected to increase 8%-9%.
• Operating margin expected to range from 19.1%-19.3%, up 50-70 basis points.
• Diluted EPS projected to grow 14%-16%.
• Free cash flow projected at $585 million-$605 million, a record and up nearly 30% YOY.
• Aerospace & Industrial sales guidance raised to 8%-10%, with operating margin expansion of 110-130 basis points.
• Defense Electronics sales growth of 4%-6%, with operating margin expansion of 20-40 basis points.
• Naval & Power sales growth of 10%-11%, with operating margin expansion of 50-70 basis points.

Business Commentary:

Strong Financial Performance and Guidance Increase:

• Curtiss-Wright reported sales of $924 million for Q2 2026, up 5% year-over-year, with operating income increasing 12% and diluted earnings per share rising 15%.
• The company raised its full-year earnings guidance due to strong first-half results, record backlog, and a favorable outlook, anticipating sales growth of 8%-9% and diluted EPS growth of 14%-16%.
• The performance was driven by the successful execution of the Pivot to Growth strategy and robust demand across A&D and commercial markets.

Defense Electronics Segment Growth:

• The Defense Electronics segment delivered record performance with orders growing nearly 50% year-over-year in Q2 2026.
• Sales in this segment are expected to grow 4%-6% for the full year, driven by strong growth in aerospace defense and increased demand for tactical communication equipment.
• Growth was supported by strategic alignment with U.S. and allied militaries' priorities, including modernization of existing platforms and new development contracts.

Naval & Power Segment and Commercial Nuclear Market:

• Sales in the Naval & Power segment grew by 7% in Q2 2026, driven by strong demand in naval defense markets and commercial nuclear aftermarket.
• The commercial nuclear market is anticipated to deliver mid-to-high teen sales growth, supported by plant outages and restarts and increased government nuclear revenue.
• The positive outlook is attributed to the segment's strategic positioning in supporting naval programs and advancements in commercial nuclear energy.

Order Book and Future Outlook:

• New orders increased by 8% in Q2 2026, resulting in an overall book-to-bill ratio exceeding 1.1 times.
• Orders are up 12% year-to-date, exceeding sales growth of 9%, which enhances confidence in meeting near-term targets and establishing a foundation for sustained growth.
• The strong order book is attributed to solid growth across A&D and commercial markets, as well as alignment with customer priorities and continued investments in growth vectors.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'Curtiss-Wright delivered excellent second-quarter results that exceeded our expectations' and 'raised our full-year earnings guidance'. Also noted 'the future remains extremely bright as the momentum continues to build' and 'we are on track to exceed all of the major financial metrics issued at our 2024 Investor Day'.

Q&A:

• Question from Nathan Jones (Stifel): Orders have been exceptionally strong... Can you talk about the duration of the backlog and how we should expect those strong order rates to translate into higher revenue levels?
  Response: Strong order book momentum driven by defense budget alignment, with multi-year programs in Defense Electronics and strong surges in general industrial orders, supporting positive outlook for 2026 and 2027.

• Question from Nathan Jones (Stifel): Can you talk about any challenges that you’re seeing in the supply chain...?
  Response: Supply chain pressures have increased but team is largely secured for 2026, positioning for 2027 with systematic management, priority allocations from key suppliers like Micron, and dual sourcing where possible.

• Question from Kristine Liwag (Morgan Stanley): Are these [growth drivers] enough to support double-digit revenue growth in the next three years...?
  Response: Yes, growth is supported by strong defense budgets, commercial aerospace ramp, commercial nuclear opportunities like AP1000, and momentum across industrial markets, with R&D investments compounding future growth.

• Question from Kristine Liwag (Morgan Stanley): How do you see the opportunity with new generation of defense tech companies...?
  Response: It's a great growth opportunity as Curtiss-Wright provides COTS capabilities and state-of-the-art technology (e.g., Nvidia processing) relevant to non-traditional defense contractors' end products, supporting quicker delivery cycles.

• Question from Jan Engelbrecht (Baird): Can you just describe the various puts and takes [for Aerospace and Industrial margins]?
  Response: Margin expansion driven by sales volume absorption, favorable product mix (e.g., EM actuation), and restructuring savings, partially offset by increased R&D investments, with strong second-half growth expected.

• Question from Jan Engelbrecht (Baird): Just if you look at the second half for Defense Electronics... how much of that is already in backlog?
  Response: Not providing exact percentage, but well-positioned following record Q2 with Q3 expected to be strong and Q4 anticipated to be very strong, with a big fourth quarter due to order timing.

• Question from Myles Walton / Louer Federal (Wolfe Research): What, if any, flow-through have you seen from [large sub contracts]?
  Response: The announcements support the industry and shipbuilders but are not a dramatic change in Curtiss-Wright's order flow, as funding aligns with existing pipeline and contracts.

• Question from Myles Walton / Louer Federal (Wolfe Research): Latest thoughts on the M&A market.
  Response: M&A remains a top priority, but market is currently frothy; company is disciplined in seeking strategic and financial fit, with ongoing activity and capital also being invested internally for growth.

• Question from Louis DiPalma (William Blair): How has the C-17 Globemaster Modernization Award progressed? Are there similar electronics modernization upgrades in the pipeline?
  Response: Program is off to a great start with strong customer satisfaction; there is potential for similar capabilities on other platforms, with other projects in the pipeline but not publicly announced.

• Question from Louis DiPalma (William Blair): What is your long-term view of the ground defense end market?
  Response: Growth drivers include Golden Dome connectivity initiatives, international opportunities (e.g., with Rheinmetall), and advancements like directed energy/lasers, though current content is relatively minor.

• Question from Scott Deuschle (Deutsche Bank): For tactical Comms specifically, are you expecting growth to step up in the second half?
  Response: Yes, tactical communications growth is expected to improve in the second half, with a strong Q4, though not in Q3 due to order timing.

• Question from Scott Deuschle (Deutsche Bank): Have you seen any signs that timing delays in Defense Electronics could be more than timing...?
  Response: Delays feel like timing issues, not demand destruction, evidenced by strong Q1/Q2 orders, strong July, and expectations for strong Q3/Q4, with no indications of customers evaluating different products.

• Question from Bradley Eiser (Citi): Take a step back and just talk a bit about the opportunities in Golden Dome and UAVs...?
  Response: Golden Dome offers opportunities in networked communications and detection systems; UAVs leverage decades of experience in high-tech systems for unmanned flight and sensor data processing.

• Question from Bradley Eiser (Citi): Also just want to touch base on the general industrial outlook... what’s the future opportunity here.
  Response: Industrial vehicles order book up 21% year-to-date, with on-highway and off-highway forecasting high/mid-single-digit growth, improving confidence for 2026/2027 despite some delays in other sub-markets.

Contradiction Point 1

Financial Forecast for General Industrial Vehicles Market

Contradiction on whether 2026 industrial vehicles revenue will meet growth targets, impacting investor expectations for the market segment.

Bradley Eiser (Citi) for John Garden - Bradley Eiser (Citi) for John Garden

2026Q2: For general industrial vehicles, the order book is up 21% year-to-date... This has improved confidence for 2026/2027, though some sub-markets... are still expected to be down slightly. - Lynn Bamford(CEO) and Chris Barkes(CFO)

Can you discuss the opportunities in UAVs and Golden Dome for Curtiss-Wright, the company's role in these areas, and the current outlook for the general industrial vehicles market, including factors driving confidence in improved performance? - Nathan Jones (Stifel)

2026Q1: The company remains cautious for 2026 and does not expect to meet the Investor Day target of low single-digit growth in this market. - Lynn Bamford(CEO)

Contradiction Point 2

Timing of AP1000 Reactor Coolant Pump (RCP) Revenue

Contradiction on whether any AP1000 RCP revenue is included in the 2026 financial guidance, affecting financial planning and forecasting.

Greg Badishkanian (Wolfe Research, on for John Godyn) - Greg Badishkanian (Wolfe Research, on for John Godyn)

2026Q2: For AP1000 RCPs, the timing of the order is uncertain for 2026, so no AP1000 revenue is included in the 2026 guide. - Chris Farkas(CFO)

What demand signals are you seeing in military aviation (fixed-wing vs. rotorcraft) and what is the timeline from customer order to revenue recognition for AP1000 reactor coolant pumps? - Greg Badishkanian (Wolfe Research, on for John Godyn)

2026Q1: The company is scenario-planning with Westinghouse. Once an order is received, revenue is recognized over a 4–5 year bell curve... - Chris Farkas(CFO)

Contradiction Point 3

Characterization of Current Supply Chain Pressures

Contradiction on the severity and nature of ongoing supply chain challenges, influencing perceptions of operational risk.

Nathan Jones (Stifel) - Nathan Jones (Stifel)

2026Q2: Pressures have increased but are not at COVID levels. The company has implemented tools and strategies learned in 2022 to manage inventory and secure supply. - Lynn Bamford(CEO)

Can you discuss the duration of the backlog, how the strong order rates will translate into higher revenue, as well as any supply chain challenges—particularly for chips and electronics—and inventory pre-positioning? - George Bancroft (Gabelli Funds)

2025Q4: The company is vigilant on watch items like high-bandwidth memory and rare earths. Mitigation strategies include sourcing dual suppliers, leveraging government high-priority ratings... - Lynn Bamford(CEO)

Contradiction Point 4

Strategic Priority and Outlook for M&A

Contradiction in the stated priority and strategic focus on mergers and acquisitions, affecting long-term growth strategy perception.

Myles Walton / Louer Federal (Wolfe Research) - Myles Walton / Louer Federal (Wolfe Research)

2026Q2: On M&A, it remains a top priority, but the market is currently 'frothy' with high multiples. The company is disciplined, focusing on strategic and financial fit... - Lynn Bamford(CEO)

What is the expected flow-through from recent large submarine contracts, and what are your latest thoughts on the M&A market? - George Bancroft (Gabelli Funds)

2025Q4: M&A is not a current high priority. The focus is on organic growth and strategic localization. While not ruled out entirely... - Lynn Bamford(CEO)

Contradiction Point 5

AP1000 Content and Order Visibility

Conflicting statements on the certainty and timing of AP1000 orders, impacting visibility into future revenue streams.

Nathan Jones (Stifel) - Nathan Jones (Stifel)

2026Q2: The strong order book reflects alignment with robust defense budgets... indicating continued growth into 2027 and beyond. - Lynn Bamford(CEO)

Can you discuss the backlog duration and how strong order rates will translate to higher revenue? - Kristine Liwag (Morgan Stanley)

2025Q3: The first order is expected in 2026, most likely driven by Poland or Bulgaria. The timing for U.S. orders is still TBD. - Lynn Bamford(CEO)