Aerospace and defense company Curtiss-Wright (NYSE:CW) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 11.4% year on year to $784.8 million. The company expects the full year's revenue to be around $3.04 billion, in line with analysts' estimates. It made a GAAP profit of $2.58 per share, improving from its profit of $2.10 per share in the same quarter last year.
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Curtiss-Wright (CW) Q2 CY2024 Highlights:
- Revenue: $784.8 million vs analyst estimates of $735.8 million (6.7% beat)
- EPS: $2.58 vs analyst estimates of $2.23 (15.5% beat)
- The company slightly lifted its revenue guidance for the full year from $3.01 billion to $3.04 billion at the midpoint
- EPS (GAAP) guidance for the full year is $10.53 at the midpoint, beating analyst estimates by 2%
- Gross Margin (GAAP): 36.2%, in line with the same quarter last year
- Free Cash Flow of $100.3 million is up from -$57.69 million in the previous quarter
- Market Capitalization: $10.28 billion
"Curtiss-Wright delivered strong second quarter results, highlighted by mid-teens revenue growth in our A&D end markets, continued operating margin expansion, and 24% growth in Adjusted diluted EPS," said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation.
Formed from a merger of 12 companies, Curtiss-Wright (NYSE:CW) provides a range of products and services to the aerospace, industrial, electronic, and maritime industries.
Aerospace
Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.
Sales Growth
A company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Unfortunately, Curtiss-Wright's 4.5% annualized revenue growth over the last five years was sluggish. This shows it failed to expand in any major way and is a rough starting point for our analysis. 
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Curtiss-Wright's annualized revenue growth of 10.8% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
Curtiss-Wright also breaks out the revenue for its most important segments, Product and Services, which are 84.3% and 15.7% of revenue. Over the last two years, Curtiss-Wright's Product revenue (aerospace & defense technology) averaged 11.7% year-on-year growth while its Services revenue (testing, maintenance, consulting) averaged 6.9% growth.
This quarter, Curtiss-Wright reported robust year-on-year revenue growth of 11.4%, and its $784.8 million of revenue exceeded Wall Street's estimates by 6.7%. We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates. This signals Curtiss-Wright could be a hidden gem because it doesn't get attention from professional brokers.
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Operating Margin
Curtiss-Wright has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 15.8%.
Analyzing the trend in its profitability, Curtiss-Wright's annual operating margin rose by 2.1 percentage points over the last five years, showing its efficiency has improved.
This quarter, Curtiss-Wright generated an operating profit margin of 16.4%, in line with the same quarter last year. This indicates the company's overall cost structure has been relatively stable.
EPS
Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Curtiss-Wright's EPS grew at a decent 8.7% compounded annual growth rate over the last five years, higher than its 4.5% annualized revenue growth. This tells us the company became more profitable as it expanded.
We can take a deeper look into Curtiss-Wright's earnings quality to better understand the drivers of its performance. As we mentioned earlier, Curtiss-Wright's operating margin was flat this quarter but expanded by 2.1 percentage points over the last five years. On top of that, its share count shrank by 10.5%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Curtiss-Wright, its two-year annual EPS growth of 25% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
In Q2, Curtiss-Wright reported EPS at $2.58, up from $2.10 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. We also like to analyze expected EPS growth based on Wall Street analysts' consensus projections, but there is insufficient data. This signals Curtiss-Wright could be a hidden gem because it doesn't have much coverage among professional brokers.
Key Takeaways from Curtiss-Wright's Q2 Results
We were impressed by how significantly Curtiss-Wright blew past analysts' revenue expectations this quarter. We were also excited its EPS outperformed Wall Street's estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $268.15 immediately following the results.
Curtiss-Wright may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.