Citi says buy little-known nuclear play with roots back to dawn of aviation

Citi expects Curtiss-Wright , an engineering company with a big nuclear business, to ride the wave of increased global military spending. Analyst Jason Gursky initiated research coverage of the defense and aviation company, which traces its roots back to the original pioneers of aviation , Glenn Curtiss and Wilbur and Orville Wright, with a buy rating and a 12-month price target of $410, implying about 20% potential upside from Friday’s close. This year, shares have already advanced about 6.2% after soaring 60% in 2024, by 34% in 2023, another 21% in 2022 and 20% in 2021. Curtiss-Wright can benefit from growth in the aerospace and defense industry with “nuclear optionality,” according to the analyst. Global military spending will increase through the the decade in an effort to deter short- and longer-term geopolitical threats in Europe and the Pacific, Gursky said. Citigroup is optimistic that Curtiss-Wright can capitalize on this trend and become net cash positive by 2026, particularly given history of being able to de-leverage its balance sheet. Gursky expects the company to boast 13% earnings growth through 2027 and consistent cash conversion. CW 1Y mountain Curtiss-Wright stock over the past year. “We expect DoD spending trends and initiatives that prioritize Aircraft, Shipbuilding, and C4I spending to drive defense end-market revenues,” Gursky wrote in a Tuesday note to clients. C4I refers to defense spending aimed at ” Command, Control, Communications, Computers, and Intelligence ” systems. “Higher production rates for new aircraft are likely to increase Aerospace & Industrial aftermarket revenues while global demand for more efficient energy solutions suggests solid nuclear [original equipment] and aftermarket revenue visibility,” Gursky wrote. Key catalysts for Curtiss-Wright’s growth include higher original equipment (OE) build rates for commercial aircraft platforms, more nuclear awards that expand Curtiss-Wright’s footprint in commercial nuclear power OE and aftermarket areas, and mergers and acquisitions to increase nuclear power, defense, and other core capabilities, according to Gursky. He also mentioned potential industry developments such as the timing of contract awards in Commercial Nuclear Aftermarket plant life extensions in the U.S. and abroad, and existing small modular reactor (SMR) partnerships between Curtiss-Wright and NuScale , TerraPower and X-energy as factors that could boost the stock. A partnership example includes Curtiss-Wright’s 2022 preferred strategic supplier agreement with X-energy to advance the design and deployment of X-energy’s Xe-100 advanced SMRs.