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Curtiss-Wright reports 4Q18 and full year 2018 results

Published by , Assistant Editor
World Fertilizer,

Curtiss-Wright Corporation reports financial results for the 4Q18 and full-year ended December 31, 2018.

4Q18 highlights

  • Reported diluted earnings per share (EPS) of US$1.89, with Adjusted diluted EPS of US$1.90, up 25% compared with the prior year;
  • Free cash flow of US$214 million, up 3%;
  • Net sales of US$649 million, up 6%, including 3% organic growth;
  • Reported and Adjusted operating income of US$110 million, up 4% and 5%, respectively;
  • Reported and Adjusted operating margin of 17%, down 20 basis points;
  • New orders of US$608 million, up 7%; and
  • Share repurchases of approximately US$119 million, or 1.1 million shares.

Full year 2018 highlights

  • Reported diluted EPS of US$6.22, with Adjusted diluted EPS of US$6.37, up 28% compared with the prior year, reflecting increased profitability in all three segments;
  • Adjusted free cash flow of US$333 million and Adjusted free cash flow conversion of 121%;
  • Net sales of US$2.4 billion, up 6%, including 3% organic growth, driven by higher sales in all end markets;
  • Reported operating income of US$374 million, with Adjusted operating income of US$382 million, up 14%;
  • Reported operating margin of 15.5%, with Adjusted operating margin of 15.8%, up 110 basis points;
  • Effective tax rate of 22.6%;
  • New orders of US$2.4 billion increased 6%, while backlog of US$2 billion increased 1% from December 31, 2017; and
  • Share repurchases of approximately US$199 million, or 1.7 million shares.

Full year 2019 business outlook

  • Expect solid growth in sales (up 3-5%), driven by increases in all end markets;
  • Anticipate higher operating income (up 4-6%), operating margin of 15.9% to 16% (up 10-20 basis points) and diluted earnings per share of US$6.80 to US$6.95 (up 7-9%), compared with Adjusted full-year 2018;
  • Commercial/Industrial segment - improved profitability due to higher sales and benefits of our ongoing margin improvement initiatives, partially offset by US$4 million for tariffs and a US$3 million increase in R&D investments;
  • Defense segment - reduced profitability, despite higher sales, due to a US$5 million increase in R&D investments;
  • Power segment - reduced profitability, despite solid sales growth, due to US$6 million for transition and IT security costs related to the relocation of our DRG business and a US$2 million increase in R&D investments;
  • Absent these R&D investments, tariffs, and DRG relocation costs, all three segments are expected to produce solid year-over-year operating margin expansion; and
  • Expect Reported free cash flow to range from US$300 to US$310 million, with Adjusted free cash flow to range from US$320 to US$330 million, excluding a US$20 million capital investment in the Power segment related to construction of a new, state-of-the-art naval facility principally for the DRG business.

“We delivered strong Adjusted diluted EPS of US$1.90 in the 4Q18, driven by better than expected operational performance in the Power segment,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “We reported a 6% increase in sales, led by a solid contribution from the DRG acquisition, as well as strong organic growth across all of our commercial markets. Further, we generated US$214 million in free cash flow, driving 259% free cash flow conversion in the quarter.

“Full year 2018 Adjusted diluted EPS of US$6.37 exceeded our expectations, driven by a strong operational performance which included 6% top-line growth with higher sales in all end markets, and strong profitability that generated a 15.8% Adjusted operating margin - the highest level of profitability achieved by Curtiss-Wright in recent history. Full-year Adjusted free cash flow of US$333 million was also strong, and enabled us to return nearly US$200 million to shareholders through share repurchase activity this past year.

“For 2019, we are projecting another solid performance, as we expect higher sales in all end markets and overall improved operating profitability, despite a planned ramp up in research and development costs and other strategic growth investments, to drive operating margin to approximately 16%. These investments remain critical to supporting our objectives for long-term profitable growth and maintaining top-quartile financial performance for all of our key financial metrics, in order to generate significant value for our shareholders.”

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