Rising Defense Budgets And Nuclear Resurgence Will Expand Opportunities

Key Takeaways

• Rising defense spending and nuclear sector growth are driving sustained long-term revenue and margin expansion, with strong international demand and a robust order pipeline.
  
• Focus on advanced technologies, disciplined capital allocation, and expanded shareholder returns positions the company for profitable growth and potential market undervaluation.
  
• Reliance on major defense and nuclear contracts, shifting customer preferences, industry headwinds, and regulatory pressures threaten Curtiss-Wright's growth, margins, and long-term earnings stability.

Catalysts

Provides engineered products, solutions, and services mainly to aerospace and defense, commercial power, process, and industrial markets worldwide.

• Surging global defense budgets, increased geopolitical tensions, and a potential expansion of NATO's spend target from 2% to 5% of GDP are fueling strong multi-year demand for Curtiss-Wright's defense systems, including embedded computing, mission-critical electronics, and platform content; management expects 20% growth in direct foreign military sales for 2025 and a visible international pipeline, positioning the company for sustained revenue and earnings expansion.
  
• The global nuclear resurgence, driven by decarbonization, energy security, and supportive regulatory moves (such as the U.S. plan to quadruple domestic nuclear output by 2050), underpins significant optionality for Curtiss-Wright's nuclear segment, with CEO-outlined opportunities to quadruple commercial nuclear revenues to $1.5 billion by mid-next decade-setting up a long-cycle growth engine for both the top line and improved margins from high-value content.
  
• Adoption of advanced digital, automation, and artificial intelligence technologies in defense and commercial sectors is translating into robust demand for Curtiss-Wright's next-generation electronic systems and edge computing solutions, increasing recurring revenues and supporting profitability as fast-growing, higher-margin segments outpace legacy programs.
  
• Record backlog growth (+12% YTD to $3.8B), strong book-to-bill ratios (1.2x in A&D), and a healthy order pipeline in both defense and nuclear align with management's confidence in posting 9–10% sales growth, 16–19% EPS growth, and over 100 bps of margin expansion in 2025-signaling undervaluation if current pricing underappreciates this forward visibility and operational leverage.
  
• Capital allocation discipline with ongoing R&D investment (+$20M YOY), accretive bolt-on M&A focus in differentiated technologies, and an expanded share repurchase/dividend program further support EPS accretion and ROIC growth (>400bps over 4 years), amplifying the company's ability to compound shareholder value if current valuation discounts these dynamics.

Curtiss-Wright Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Curtiss-Wright's revenue will grow by 6.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.7% today to 14.7% in 3 years time.
• Analysts expect earnings to reach $593.3 million (and earnings per share of $16.06) by about August 2028, up from $451.4 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 38.4x on those 2028 earnings, down from 41.5x today. This future PE is greater than the current PE for the US Aerospace & Defense industry at 32.2x.
• Analysts expect the number of shares outstanding to decline by 1.62% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.73%, as per the Simply Wall St company report.

Curtiss-Wright Future Earnings Per Share Growth

Risks

• Heavy dependence on large defense and nuclear contracts exposes Curtiss-Wright to timing risks, contract renewal risk, and fluctuations in government and customer budgets-potentially increasing future revenue volatility and pressuring long-term earnings growth.
  
• Rapid advances in digital, cyber, and AI solutions within defense could cause customer budgets to shift toward software-based offerings rather than Curtiss-Wright's hardware-focused portfolio, which may erode the company's market share and compress revenue and margins over time.
  
• Prolonged soft demand or macro challenges in the global industrial market-highlighted by ongoing flat sales in industrial segments-could limit overall growth and reduce the company's diversification, impacting consolidated revenue and net profit expansion.
  
• Delays, uncertainties, or potential policy reversals in the global nuclear power buildout-including large new reactor projects and small modular reactor deployments-could undermine projected multi-year revenue acceleration in Curtiss-Wright's nuclear segment, risking both revenue growth and investment returns.
  
• Increased regulatory, supply chain, and competitive pressures (e.g., from commercial aerospace and emerging defense entrants) may elevate compliance costs, disrupt margins, and intensify price pressure, thereby threatening Curtiss-Wright's ability to sustain net margins and strong ROIC over time.

Valuation

• The analysts have a consensus price target of $520.333 for Curtiss-Wright based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $572.0, and the most bearish reporting a price target of just $457.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.0 billion, earnings will come to $593.3 million, and it would be trading on a PE ratio of 38.4x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of $496.79, the analyst price target of $520.33 is 4.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.