Investment Thesis
Curtiss Wright demonstrates strong earnings growth (22% EPS expansion) and solid profit margins, but this growth is contradicted by negative operating cash flow (-$5.7M) and negative free cash flow (-$17.5M), raising quality-of-earnings concerns. Combined with critically low returns on capital (4.9% ROE, 2.4% ROA), the company is not efficiently deploying its $2.6B equity base, warranting a cautious stance despite positive revenue momentum.
Strengths
- Accelerating earnings growth: 19.6% net income and 22% EPS growth YoY demonstrating operational leverage
- Healthy profitability margins: 36.3% gross margin, 17.5% operating margin, and 14% net margin are solid for industrial machinery sector
- Strong debt service capacity: 16.0x interest coverage ratio with moderate 0.36x debt-to-equity leverage indicates financial stability
Risks
- Critical cash flow deterioration: Negative operating cash flow (-$5.7M) and free cash flow (-$17.5M) despite positive earnings suggests working capital problems, accounting quality issues, or unsustainable earnings trends
- Severely depressed capital returns: 4.9% ROE and 2.4% ROA indicate the company is not generating acceptable returns on $2.6B in shareholder equity, implying inefficient capital allocation
- Liquidity pressure risk: Negative free cash flow combined with $957.6M long-term debt and 1.05x quick ratio creates vulnerability if operating cash flow does not reverse
Key Metrics to Watch
- Operating cash flow and working capital trends - critical to diagnose cash generation deterioration and validate earnings quality
- Return on equity trajectory - must improve from current 4.9% to demonstrate capital efficiency
- Free cash flow sustainability - must turn positive to support debt obligations and organic growth
Financial Metrics
Revenue
913.7M
Net Income
128.2M
EPS (Diluted)
$3.46
Free Cash Flow
-17.5M
Total Assets
5.3B
Cash
343.4M
Profitability Ratios
Gross Margin
36.3%
Operating Margin
17.5%
Net Margin
14.0%
ROE
4.9%
ROA
2.4%
FCF Margin
-1.9%
Balance Sheet & Liquidity
Current Ratio
1.52x
Quick Ratio
1.05x
Debt/Equity
0.36x
Debt/Assets
50.1%
Interest Coverage
16.05x
Long-term Debt
957.6M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-08T09:50:46.257746 |
Data as of: 2026-03-31 |
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