Curtiss-Wright Corporation (CW) Cash Flow Statement

The OCF/NI ratio of 1.20 in 2026Q2, up from 1.13 in the prior year quarter, suggests that earnings are well-backed by cash generation. However, the first quarter of each year shows a negative OCF/NI (e.g., -0.04 in 2026Q1), reflecting seasonal working capital outflows, which is typical for defense contractors. The consistent positive conversion in other quarters implies that accruals are not inflating reported profits.

The FCF margin improvement from 13.4% in 2025Q2 to 16.4% in 2026Q2 indicates strong operational leverage and efficient capital allocation. This growth is consistent with the company's raised guidance and management's commentary on better-than-expected cash generation. The trajectory suggests that FCF is growing faster than net income, which may signal improving cash conversion efficiency.

The low capex intensity, despite a slight increase, indicates that Curtiss-Wright's business model does not require heavy capital investment to grow, likely due to its focus on engineering and services rather than manufacturing scale. This supports high FCF conversion and suggests that growth investments are being made efficiently. The increase in capex may reflect investments in capacity for nuclear programs, but it remains well below depreciation levels, implying that maintenance capex is manageable.

The large negative working capital changes in Q1 of each year (e.g., -$151.1M in 2024Q1, -$174.4M in 2025Q1) are typical for defense contractors, reflecting timing of government payments and milestone billings. The positive swings in Q4 (e.g., $169.9M in 2025Q4) suggest strong collections and may indicate efficient receivables management. Investors should monitor this seasonality, as it can distort quarterly cash flow comparisons.

The company has consistently repurchased shares, with notable spikes in Q3 2025 ($290M) and Q4 2025 ($139.8M), suggesting opportunistic buybacks. Dividends are modest, with a yield likely below 1%, so buybacks are the primary vehicle for returning cash. This deployment strategy, combined with a fortress balance sheet (D/E of 0.52%), suggests management is confident in future cash flows and may be signaling undervaluation.

The cumulative OCF/NI ratio of approximately 1.42 over the period suggests that earnings are more than fully backed by cash, with the excess likely driven by non-cash charges like D&A and favorable working capital management. This divergence is a positive signal, as it implies that reported profits are conservative and that the company has ample cash to fund growth and shareholder returns. However, the seasonality of working capital should be considered when interpreting quarterly figures.