Curtiss-Wright(US:CW)2022-11-06 02:34Financial Data and Key Metrics Changes - Sales increased by 3% overall, with adjusted diluted EPS rising 10% year-over-year to $2.07, and up 13% sequentially [7][15] - Operating margin expanded by 70 basis points to 18.2% in Q3 2022, reflecting strong performance in the Aerospace & Industrial segment [7][25] - New orders surged by 32% year-over-year to $818 million, achieving a book-to-bill ratio of 1.3x [8][10] Business Line Data and Key Metrics Changes - Aerospace & Industrial segment saw a 9% sales growth, with a 12% increase when excluding foreign exchange impacts [20] - Defense Electronics segment faced revenue timing issues, with expected revenue delays of approximately $45 million due to supply chain challenges [12][22] - Naval & Power segment reported 9% sales growth, driven by the new arresting systems business [23] Market Data and Key Metrics Changes - The global supply chain challenges significantly impacted the Defense Electronics segment, delaying revenue recognition [11][12] - Foreign exchange headwinds affected sales by slightly over 1%, equating to nearly $10 million, primarily within the Aerospace & Industrial segment [14][66] - Strong demand in commercial aerospace and Nuclear Aftermarket markets continued to recover towards pre-pandemic levels [10][20] Company Strategy and Development Direction - The company signed a strategic supplier agreement with X-energy for advanced small modular reactors, expected to generate over $100 million in revenue per plant [18][39] - The focus remains on operational excellence initiatives to combat inflationary pressures and improve profitability [7][15] - The company aims to capitalize on growth trends in nuclear power and defense sectors, with a strong emphasis on advanced reactor technologies [41][45] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain challenges but expressed confidence in the fundamental strength of the business and demand across segments [17][44] - The company expects a recovery in defense revenues in 2023, with a smoother revenue flow anticipated due to delayed recognition [73] - Management remains optimistic about long-term growth opportunities in the nuclear sector, supported by favorable legislation and increasing global demand for clean energy [41][42] Other Important Information - The company revised its 2022 sales growth outlook to a range of 2% to 4%, reflecting the impact of delayed defense revenues and foreign exchange headwinds [15][26] - Free cash flow guidance was adjusted to a range of $275 million to $315 million, influenced by supply chain challenges and timing of cash collections [36][37] - The company is focused on maintaining a balanced capital allocation strategy while investing in growth opportunities [46] Q&A Session Summary Question: Details on the equity stake in X-energy - Management confirmed the investment in X-energy, emphasizing the partnership's strength and the potential for advanced reactor technology in the growing energy market [48][49] Question: Clarification on the nuclear opportunity with Poland - Management clarified that the agreement involves three plants, with potential for additional contracts as Westinghouse finalizes details [51][52] Question: Recovery plan for the Defense Electronics segment - Management indicated that while supply chain issues persist, they expect a smoother revenue flow into 2023, reducing the typical seasonal revenue ramp [73] Question: Order activity for Nuclear Aftermarket - Management noted an increase in orders related to plant life extensions, with expectations for continued growth in the aftermarket segment [75][76] Question: Strategic inventory management in light of supply chain challenges - Management acknowledged the need for a shift in inventory strategy to buffer against long lead times, emphasizing the importance of managing working capital effectively [80][84]