Curtiss-Wright (NYSE:CW) Q3 2025 Earnings Call November 06, 2025 10:00 AM ET Company ParticipantsChristine Lewis - AdministratorJim Ryan - VP of Investor RelationsLynn Bamford - Chair and CEONathan Jones - Managing DirectorMyles Walton - Managing DirectorChris Farkas - VP and CFOConference Call ParticipantsTony Bancroft - Research AnalystPete Skibitsky - AnalystMichael Ciarmoli - Senior Research AnalystPeter Arment - Senior Research AnalystNone - AnalystOperatorWelcome to the Curtiss-Wright third quarter 20 ...

Curtiss-Wright (NYSE:CW) Q3 2025 Earnings Call November 06, 2025 10:00 AM ET Company ParticipantsChristine Lewis - AdministratorJim Ryan - VP of Investor RelationsLynn Bamford - Chair and CEONathan Jones - Managing DirectorChristopher Farkas - VP and CFOMyles Walton - Managing DirectorConference Call ParticipantsTony Bancroft - Research AnalystPete Skibitsky - AnalystMichael Ciarmoli - Senior Research AnalystPeter Arment - Senior Research AnalystNone - AnalystOperatorWelcome to the Curtiss-Wright Third Quar ...

（记者：刘渊博 毕笑天 郭嘉 赵彦凯） ...

Core Viewpoint - The article discusses the escalating trade tensions between the U.S. and China, particularly focusing on the U.S. demand for China to lift restrictions on rare earth exports, highlighting the strategic importance of these resources for national security and technological advancement [1][15][39]. Group 1: U.S. Trade Policy and Strategy - Trump's assertion that "tariffs equal national security" reflects a desperate political maneuver rather than a solid strategy, indicating a loss of confidence in his administration's trade policies [3][5]. - The trade war has not yielded the expected benefits for the U.S., with rising costs for American businesses and dissatisfaction among allies, leading to a decline in Trump's domestic support [6][8]. - The focus on rare earths as a singular demand illustrates a shift from broader trade negotiations to a more desperate, point-specific strategy, revealing the diminishing options available to the U.S. [24][32]. Group 2: Importance of Rare Earths - China controls over 80% of global rare earth production, while the U.S. relies on imports for 90% of its rare earth needs, making this a critical issue for U.S. military and technological sectors [15][21]. - The U.S. has faced significant delays in developing domestic rare earth processing capabilities, with projects pushed back to 2026, underscoring the challenges in establishing alternative supply chains [15][17]. - The competition for rare earths is not merely an economic issue but a matter of national security, as these resources are essential for modern technology and military applications [15][33]. Group 3: China's Position and Strategy - China's restrictions on rare earth exports are part of a broader strategy to manage its resources sustainably and assert its position in global trade, rather than a targeted response to U.S. demands [17][19]. - The Chinese government has maintained a calm and resolute stance in negotiations, indicating a strong position in the face of U.S. pressure [19][39]. - The ongoing struggle over rare earths reflects a larger contest for defining future technological and industrial standards, with China increasingly positioning itself as a rule-maker rather than a rule-taker [35][39].

Group 1 - The U.S. Navy has delayed the construction of the next-generation nuclear submarine SSN(X) from 2035 to 2040, raising concerns about the U.S. military's declining position in the Western Pacific [1][50]. - The F-15EX, the latest model of the F-15, has recently arrived at Kadena Air Base, highlighting the aging fleet of F-15C that has been stationed there [2][7]. - The REFORPAC exercise aims to test large-scale air combat capabilities in a highly dynamic environment, enhancing coordination between the U.S. and its allies [6][5]. Group 2 - The U.S. Navy's nuclear submarine fleet is projected to consist of 48 submarines by 2026, with a distribution of 28 in the Pacific Fleet and 20 in the Atlantic Fleet [16][20]. - The report indicates that only 29 submarines will be operational at any given time due to maintenance schedules, with 19 in the Pacific and 10 in the Atlantic [16][18]. - The U.S. Navy plans to utilize submarines for anti-surface warfare in the Taiwan Strait, with specific operational strategies outlined for their deployment [9][10][14]. Group 3 - The report discusses the potential for U.S. submarines to engage Chinese naval forces, with a hypothetical scenario predicting the sinking of 53 Chinese vessels, including aircraft carriers [31][36]. - The operational challenges faced by U.S. submarines in the Taiwan Strait are highlighted, including the need for stealth and the complexities of underwater warfare [37][40]. - The article emphasizes the importance of nuclear submarines in maintaining a strategic advantage, despite the declining number of operational submarines and the challenges in shipbuilding capacity [46][48][49].

Financial Data and Key Metrics Changes - Sales for the second quarter of 2025 reached $877 million, a 12% year-over-year increase, driven by strong organic growth of 9% [6][9] - Operating income increased by 20% year-over-year, resulting in a 130 basis points expansion in overall operating margin [7][16] - Diluted earnings per share rose by 21% year-over-year, slightly exceeding expectations [8] - Free cash flow was $117 million, reflecting a 17% year-over-year improvement and nearly 100% cash conversion [8][10] - The company raised its full-year sales growth guidance to 9% to 10% and expects diluted EPS growth of 16% to 19% [10][25] Business Line Data and Key Metrics Changes - Aerospace and Industrial segment sales increased by 3%, with solid OEM sales growth in commercial aerospace [11] - Defense Electronics segment sales grew by 11%, driven by increased sales of embedded computing equipment [12] - Naval and Power segment sales surged by 19%, primarily due to higher naval defense revenues [15] Market Data and Key Metrics Changes - The overall book-to-bill ratio across Aerospace and Defense markets was 1.2 times, indicating strong demand [8] - The backlog increased by 12% year-to-date, reaching a record of over $3.8 billion [9] - Direct foreign military sales are expected to grow by approximately 20% in 2025, reflecting increased demand from NATO and allied countries [19][31] Company Strategy and Development Direction - The company is focused on a "pivot to growth" strategy, emphasizing operational excellence and collaboration on R&D projects [5][39] - Key growth areas identified include defense and commercial nuclear sectors, with expectations for significant long-term opportunities [28][34] - The company plans to leverage advancements in AI and machine learning to enhance its defense applications [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strong financial performance in 2025, supported by a robust order book and operational growth [5][39] - The company anticipates continued growth in defense spending, particularly in the U.S. and among NATO allies [28][31] - Management highlighted the importance of maintaining a disciplined capital allocation strategy while pursuing growth opportunities [39] Other Important Information - The Board approved a $400 million increase in share repurchase authorization and a 14% increase in the quarterly dividend [9] - The company expects to generate free cash flow exceeding $520 million to $535 million, reflecting an improved conversion rate of approximately 108% [26] Q&A Session Summary Question: What is driving the growth acceleration in commercial aerospace? - Management noted a conservative position on commercial aerospace initially, but positive signals from customers indicate strong growth potential despite industry challenges [42][44] Question: Can you elaborate on the applications of the new GPU chips? - The new GPU chips are being utilized for tactical edge applications, enhancing decision-making capabilities in defense systems [47][48] Question: How sustainable is the margin performance in Defense Electronics? - Management indicated ongoing restructuring and operational excellence initiatives are driving margin improvements, with further opportunities for expansion [53][55] Question: What is the outlook for the M&A pipeline? - The company is actively exploring M&A opportunities but remains disciplined in its approach, prioritizing strategic fits [67][69] Question: How do you expect to grow direct foreign military sales? - Management highlighted strong positions in defense electronics and partnerships with NATO allies as key growth drivers for direct foreign military sales [90][92]

Core Insights - The British Royal Navy has conducted a test in the Mediterranean involving the launch and recovery of an unmanned underwater vehicle (UUV) from a submarine's torpedo launch tube [1] Group 1 - The test is part of the "Skura Program," which demonstrates the capability of attack submarines to operate unmanned underwater vehicles while fully submerged [1]