New Nuclear Alliance Plans to Triple Nuclear Energy - Curtiss-Wright is a Potential top Profiteer!
Curtiss-Wright is engaged in the development, production and sale of technology-intensive products used in the two core areas of aerospace and defense as well as in commercial markets such as energy and process solutions or general industry. Not only does the core defense solutions business play an important role in the face of ongoing geopolitical tensions and rising defense spending, but also military expertise in nuclear-powered submarines and aircraft carriers for the commercial energy market. Nations are increasingly recognizing that the energy transition and the 1.5 degree target by 2050 cannot be achieved without nuclear energy. At the same time, energy demand is likely to triple by 2045. There are currently around 435 operating nuclear reactors in around 30 countries worldwide, which cover 14% of global electricity demand. In the USA, this figure is 18% and in France as much as 63% of electricity generation. At the annual climate conference in Dubai, a new nuclear alliance consisting of 22 countries announced its intention to triple nuclear energy capacity by 2050. The countries involved include the USA, Canada, the UK and France. This is particularly promising as Curtiss-Wright is already represented in all US nuclear power plants with its comprehensive product range. According to US climate envoy John Kerry, several trillion dollars are available for nuclear financing.
Order opportunities for the leading reactor coolant pump are improving
Curtiss-Wright offers airlocks and doors, valves, various actuators, fastening elements, cable and plug connectors through to control and monitoring solutions. Another offer is the world's most advanced coolant pump for Westinghouse's AP1000 reactor, which received new construction permits in Bulgaria and Poland in the last quarter. CEO Lynn Bamford emphasized in the earnings call that this reaffirms the value of the technology and that contracts for reactor coolant pumps could improve significantly over the next two to four years. The nuclear alliance could provide precisely this trigger. The energy and process market currently accounts for around 18% of Curtiss-Wright's revenues. Small modular reactors (SMRs), which according to Curtiss-Wright require the same range of equipment despite their smaller design, also offer growth potential. Although a flagship SMR project in the USA was shut down due to high costs, Microsoft announced earlier this year that it was planning to use SMRs to operate its data centers. The nuclear power business is expected to grow in the high single digits in the current quarter and has already been impacted recently by the discontinued sale of the CAP1000 reactor adapted for the Chinese market. However, this could be better compensated for by an improving order situation in the rest of the world.
Defense business provides tailwind in the 3rd quarter
In the third quarter, sales and net profit increased by 15% and 23% respectively, clearly exceeding consensus expectations. The order backlog increased by 12% to $2.9 billion. Around 56% of revenue came from the defense market for ground, air and naval vehicles. Defense electronics in particular set new records with growth of 34% and high bookings for embedded computing and tactical communications equipment. Boeing and Airbus are also served in the commercial aviation market, but only 11% of revenues are generated there. Management has raised its growth targets for 2023 from the previous 7-9% to 8-10%. Net profit is also expected to improve from $8.90-9.15 to $9.00-9.20 per share. As recently as November 29, the Stifel analysts raised their price target from $227 to $243 (Buy) after a meeting with management reinforced their confidence in the long-term growth opportunities. The growth check currently scores 14 out of 15 possible points.
- Climate targets and hunger for energy make nuclear power indispensable. As part of a new nuclear alliance, 22 countries are now planning to triple their use of nuclear energy
- Curtiss-Wright is already present in all US nuclear power plants and supplies the most advanced reactor coolant pumps
- The core business is driven by high defense spending and has already enabled an increase in the growth forecast
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