Curtiss-Wright (CW) Q4 2025 earnings review
Record Orders and Broad-Based Growth Define Q4
Curtiss-Wright closed 2025 with an impressive acceleration, delivering 15% revenue growth and 16% adjusted EPS growth in Q4. The standout metric was an 18% surge in new orders to $1.1 billion, pushing the backlog to a record $4.1 billion—a strong leading indicator for 2026. While top-line momentum was robust across Aerospace & Defense (+16%) and Commercial (+13%) markets, margin mix proved challenging; adjusted operating margin compressed slightly YoY (-10 bps) as significant expansions in Defense Electronics were offset by declines in Aerospace & Industrial and Naval & Power. Management's 2026 guidance forecasts continued double-digit EPS growth, signaling confidence in the 'Pivot to Growth' strategy.
🐂 Bull Case
The Defense Electronics segment is firing on all cylinders, with sales up 17% and operating margins expanding 160 bps to 25.9%. Strong demand for embedded computing in ground defense and avionics indicates high-value design wins are scaling.
New orders jumped 18% to $1.1 billion, generating a healthy 1.2x book-to-bill ratio. Total backlog now stands at $4.1 billion (+18% YoY), providing exceptionally high visibility into FY26 revenue targets.
🐻 Bear Case
Despite 15% revenue growth, consolidated adjusted operating margin contracted 10 bps to 19.7%. Significant margin compression in Aerospace & Industrial (-120 bps) and Naval & Power (-120 bps) highlights negative mix shifts and R&D costs weighing on profitability.
General Industrial market sales were flat in Q4. Weakness in global on-highway industrial vehicles offset gains elsewhere, creating a drag on the Aerospace & Industrial segment.
⚖️ Verdict: 🟢
Strong. The top-line acceleration and order book strength outweigh the slight margin mix noise. With 2026 guidance calling for double-digit EPS growth and margin expansion, the structural growth story remains intact.
Key Themes
Defense Electronics: The Margin Engine
Defense Electronics (DE) was the star performer of Q4, delivering 17% sales growth and a massive 160 bps margin expansion to 25.9%. Drivers included acceleration in ground defense embedded computing and strong commercial aerospace avionics demand. This segment single-handedly buoyed consolidated margins against weakness elsewhere.
Naval & Power Volume Surge
Naval & Power revenue surged 21% to $417M, driven by timing of production on Columbia and Virginia-class submarines and strong commercial nuclear sales. However, this volume came with a cost: margins dropped 120 bps to 17.9% due to an unfavorable mix of products and higher R&D investment.
Aerospace & Industrial Margin Pressure
While sales grew 5%, the A&I segment saw margins contract 120 bps to 20.1%. Management cited 'unfavorable mix' as the primary culprit, likely exacerbated by the stagnation in the high-margin General Industrial market (flat sales) and lower sales to on-highway vehicle manufacturers.
Capital Allocation & Returns
Cash flow generation remains robust with $315M in Q4 FCF (224% conversion). The company repurchased $140M in shares in Q4 alone ($465M for FY25). 2026 guidance assumes continued strong FCF ($575-595M) and deployment capability.
Commercial Nuclear & SMRs
Commercial nuclear continues to be a growth vector, supporting next-generation advanced reactors (SMRs) and existing fleet updates. This contributed to the strong Power & Process growth (+22% in Q4).
Other KPIs
Accelerating. Orders grew 18% YoY, driving a book-to-bill of 1.2x. This level of intake significantly de-risks the 2026 revenue guidance of 6-8% growth.
Up 18% YoY. The backlog provides extended visibility into 2026 and beyond, particularly in long-cycle naval and defense programs.
Up 13% YoY. FCF conversion was an impressive 224%, driven by higher earnings and working capital improvements, despite a $14M increase in CapEx.
Guidance
Decelerating. Implies 6-8% growth vs 12% in FY25. However, this aligns with long-term organic targets and reflects a high base year.
Stable/Solid. Implies 11-15% growth, continuing the double-digit compounding trajectory seen in FY25 (+21%).
Accelerating. Implies 30-60 bps expansion from FY25's 18.6%, suggesting management expects to overcome Q4's mix headwinds.
Stable growth. Up 4-7% YoY, factoring in higher capital expenditures (~$25M increase) to support growth.
Key Questions
Naval & Power Margin Dilution
Margins in N&P dropped 120 bps in Q4 despite 21% sales growth. Is this mix shift structural due to the ramping of lower-margin development programs, and when should we expect leverage to return?
Industrial Market Outlook
With General Industrial sales flat and on-highway markets weak, what assumption underpins the FY26 guidance for this segment? Are you forecasting a recovery or continued stagnation?
Supply Chain & R&D
R&D investments and inventory build have impacted margins and cash. How much of the margin expansion guided for 2026 is dependent on supply chain normalization vs. pricing actions?