Curtiss-Wright Corporation (CW) Earnings Call Transcript & Summary

Welcome to the Curtiss-Wright Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Jim Ryan, Vice President of Investor Relations.

Thank you, Angela, and good morning, everyone. Welcome to Curtiss-Wright's Second Quarter 2026 Earnings Conference Call. Joining me on the call today are Chair and Chief Executive Officer, Lynn Bamford; and Executive Vice President and Chief Financial Officer, Chris Farkas. A copy of today's financial presentation and the press release are available in the Investor Relations section of our website. A replay of this webcast will also be available on our website. Our discussion today includes certain projections and forward-looking statements that are based on management's current expectations and are not guarantees of future performance. We detail those risks and uncertainties associated with our forward-looking statements in our public filings with the SEC. As a reminder, the company's results and guidance include an adjusted non-GAAP view that excludes certain costs or to provide greater transparency into Curtiss-Wright's ongoing operating and financial performance. GAAP to non-GAAP reconciliations are available in the earnings release and on our website. Now I would like to turn the call over to Lynn to get things started.

Thank you, Jim, and good morning, everyone. Curtiss-Wright delivered excellent second quarter results that exceeded our expectations. We also raised our full year earnings guidance to reflect the strong first half results record backlog and the outlook for the balance of the year. The successful and ongoing execution of our Pivot to Growth strategy has been the key to our quarterly performance, and I'm proud of our team's ability to deliver consistently strong results for our shareholders. With that, and turning to today's presentation, I'll begin with the highlights of our second quarter 2026 results. Sales of $924 million grew 5% year-over-year, reflecting solid growth across our overall A&D and Commercial markets. Operating income increased 12% year-over-year, exceeding our sales growth and resulted in 110 basis points of operating margin expansion. As a result, diluted earnings per share increased 15% year-over-year and was slightly ahead of our expectations, driven by the strong operational performance. We also generated $160 million of free cash flow, representing a year-on-year improvement of 37% and a strong cash conversion rate of 116%. The Free cash flow generation continues to be an important focus for the team, driving funding for continued investments back into the organization to support our future profitable growth. I'll provide more information about these targeted investments in our alignment to growth factors across our markets later in my prepared remarks. Regarding our order book, we experienced strong demand in the second quarter as new orders increased 8% and reflected an overall book-to-bill in excess of 1.1x. We have a robust and growing pipeline, which continues to demonstrate positive momentum across our A&D and Commercial markets. Digging into the details by segment. I'll start with Defense and Electronics, which delivered a record performance as orders grew nearly 50% year-over-year and are now up more than 30% year-to-date requesting the team's alignment to the strategic growth priorities of the U.S. and Allied military. Notable bookings within the segment included some significant awards for turret drive stabilization systems supporting international ground vehicles, along with tactical communication equipment supporting the U.S. Army, Marine Corps and Air Force operations. We also received numerous awards supporting the modernization of existing helicopter, UAV and fighter jet platforms, some initial orders on Golden Dome and various development contracts supporting next-generation programs. Next, in the A&I segment and starting with our defense market, we experienced strong demand for our industry-leading EM actuation technology supporting the U.S. Army's IFPC program. This program is on track to receive another sizable increase in funding under the FY '27 budget and maintain continued healthy growth projections. I would also emphasize the notable progress in our industrial vehicle order book, which has achieved strong growth for 3 consecutive quarters and is contributing to our more positive outlook in the general industrial market. Chris will discuss this further in his remarks. Lastly, within the Naval and Power segment, following a strong Q1 order book, second quarter orders were down year-over-year, principally due to the timing of Naval Defense orders on submarine programs. Aside from that, we continue to benefit from increasing demand in our commercial nuclear aftermarket, supporting plant outages at restarts and also experienced a strong demand for valve equipment in our process markets. To sum up our overall order activity and based on the strong demand thus far in 2026, orders are up 12% year-to-date, exceeding sales growth of 9% and to yield an overall book-to-bill in excess of 1.2x. In addition, Curtiss-Wright's strengthening pipeline enhances our confidence in meeting our near term target and establishing a strong foundation for sustained medium- and long-term growth across our end markets. Turning to our full year 2026 guidance. Overall sales are now projected to increase 8% to 9%, driven by more favorable outlook in our defense and general industrial markets. We continue to expect that operating income growth will outpace sales growth, and our increased guidance reflects 50 to 70 basis points of margin expansion in pursuit of a record 19.1% to 19.3%. As a result, diluted EPS is now projected to grow 14% to 16% as we continue to compound our earnings at a mid-teens pace over time. Lastly, we raised our free cash flow guidance and continue to expect strong free cash flow conversion in excess of 105%. Overall, Curtiss-Wright's strong growth in revenue during the first half of 2026, along with gains in operational efficiency have positioned our team to continue to deliver outstanding financial performance. Now I would like to turn the call over to Chris to provide a more in-depth review of our financials.

Thank you, Lynn. Turning to Slide 4, I'll begin by reviewing the key drivers of our second quarter 2026 performance by segment. Starting in Aerospace and Industrial, overall sales increased 12%, which was in line with our expectations. Our results reflected higher sales of actuation and sensors equipment within our Aerospace Defense market, supporting various U.S. and foreign fighter jet programs. In addition, we experienced solid sales growth for EM actuation equipment supporting ground-based mobile launcher systems. Within the commercial Aerospace market, we experienced solid OEM sales growth supporting increased production on both narrow-body and wide-body platforms. And in the general industrial market, our results reflected modest growth in sales for industrial vehicle products. Regarding the segment's operating performance. Operating income and margin grew 25% and 180 basis points, respectively, driven by favorable absorption on higher revenues, favorable mix and restructuring savings which were partially offset by continued investments in development programs. Next in the Defense Electronics segment. Overall sales were down 3% and essentially in line with our expectations. Within the segment's ground defense market and as anticipated, our results reflected lower sales of tactical communications equipment due to the timing of prior year orders, which were partially offset by higher Turret Drive stabilization systems revenues supporting international programs. Growth in the aerospace defense market was driven by higher domestic sales of embedded computing equipment supporting various aircraft modernization, UAV and next-generation development programs. Regarding the segment's operating performance, we delivered stronger-than-expected second quarter operating margin of 28%, up 120 basis points year-over-year, reflecting a favorable mix of business and cost containment which more than offset higher investment in Research and Development. Moving to the enablement Power segment. Sales growth of 7% was primarily driven by strong growth in our Naval and Defense markets associated with the timing of production on submarine programs. We also experienced a solid uplift in aftermarket revenues supporting naval shipyards, including increased support for the CVN-75 refueling and complex overhaul program. Growth in the Power and Process market was mainly driven by increased revenues in the commercial nuclear market supporting advanced small modular reactors. We also experienced higher government nuclear revenues supporting various DOE projects at National Laboratories. Regarding the segment's operating performance. Operating income grew 12%, generating 80 basis points in operating margin expansion, mainly reflecting favorable absorption on higher revenues. To sum up Curtis rights, second quarter results, our solid top line performance generated a strong operating margin of 19.4%, driving 110 basis points in operating margin expansion. Turning to our full year 2026 guidance. I'll begin on Slide 5 of our end market sales outlook, where we now anticipate total sales to grow 8% to 9%, and driven by improved expectations in both our defense and general industrial markets. Starting in Aerospace Defense, we raised our full year outlook to a new range of 12% to 14%, reflecting increased sales of actuation and sensors equipment supporting both domestic and international fighter jet programs. Additionally, we continue to project strong year-over-year sales growth for defense electronics, which we expect to accelerate across the remainder of this year. Within ground defense, while confident in the pipeline and growing strength in the 2026 order book, we maintained our full year 2026 outlook based on the timing of production for our tactical communications equipment. Beyond the timing matters, we continue to expect increased actuation sales supporting the ISPC program as well as increased demand for Turret Drive stabilization systems supporting international ground vehicle programs, most notably through our relationship with Ronata. In Naval and Defense, following our strong first half results, we now project full year sales growth of 7% to 9%, and mainly due to expectations for higher production revenue on submarine programs, while we continue to expect solid growth on the CVN-81 carrier program. This raising guidance also reflects increased aftermarket revenues supporting the CVN-75 refueling and complex overhaul program. Moving to commercial aerospace. Our guidance continues to reflect the strength of our backlog, supporting the ramp-up in OEM production across both major narrow-body and midbody platforms. Our outlook for 10% to 12% sales growth remains unchanged, and we remain on track to deliver steady sequential growth over the remainder of the year. Wrapping up our aerospace and defense market outlook, we now expect total to 9%. Moving to our Commercial markets. Power and Process, we maintained our outlook for full year sales to increase 13% to 15%. Starting in the commercial nuclear market, we expect to deliver mid- to high-teens sales growth this year, driven by the continued underlying strength of our order book. Of note, we anticipate sales in this market to be flat sequentially in Q3 as fewer outages are expected during peak electricity demand followed by a strong fourth quarter performance. Shifting to the process market, we remain on track higher sales of MRO valves and instrumentation solutions as well as higher revenues from subsea pump development and then similarly deliver a strong fourth quarter performance. Lastly, General Industrial. As Lynn mentioned earlier, we're seeing steady improvements in our industrial vehicles order book and now anticipate full year sales growth of 1% to 3%. We remain encouraged by the improving outlook and expect continued momentum in this market as we approach 2027. Wrapping up our total commercial markets, we continue to project that total sales in these markets will increase 8% to 10%. Moving on to our updated full year 2026 financial outlook by segment on Slide 6, I'll begin in Aerospace and Industrial, where we increased our revenue guidance to a new range of 8% to 10% driven by the strong first half performance in the segment A&D markets, continued growth in our order book and the anticipated ramp-up in commercial aerospace production. Regarding the segment's profitability, operating income is now projected to grow 15% to 17% and drive operating margin expansion of 110 to 130 basis points, ranging from 18.5% to 18.7%. In addition to the improved top line guide, this revised outlook reflects a more favorable absorption and mix on higher sales. For your modeling purposes, we expect strong second half growth in total sales and profitability, with the results fairly evenly distributed between the third and fourth quarters. Moving to Defense Electronics, where we continue to anticipate sales will grow 4% to 6%, principally driven by strong growth in aerospace defense and partially offset by the timing of revenues in Ground Defense. Regarding the segment's profitability, we now expect operating income growth of 5% to 7% and operating margin expansion of 20 to 40 basis points, marking continued improvement in our industry-leading margins to a new range of 27.5% to 27.7%. For your modeling purposes, we expect the segment's third quarter sales to be flat with our second quarter results, mainly due to the timing of ground defense revenues, followed by a strong finish to the year. In addition, third quarter operating income and margin are expected to be down sequentially as favorable mix experienced in the first half of this year is anticipated to normalize by year-end, while we also expect a higher level of second half R&D investments. In Enabling Power, we now expect sales to grow 10% to 11%, reflecting the increased Naval Defense market outlook and overall solid growth across the segment's commercial markets. Regarding the segment's profitability, we now expect operating income growth of 14% to 16% and operating margin expansion of 50 to 70 basis points with this uplift mainly driven by the stronger revenue outlook. For your modeling purposes, we remain on track to deliver steady sequential sales growth over the remainder of the year. In addition, we expect the segment's third quarter operating income and margin to be in line with our second quarter results with higher absorption mainly being offset by increased R&D investments. So to summarize our 2026 outlook, overall, we now anticipate total Curtiss-Wright operating income will grow 11% to 13% and expect operating margin to range from 19.1% to 19.3%, now up 50 to 70 basis points. For your modeling purposes, at the overall Curtis rate level, we expect third quarter 2026 sales to reflect modest growth relative to our second quarter results while operating income and margin are projected to be flat sequentially based on the timing of revenues, unfavorable mix in Defense Electronics and overall higher R&D investments. We anticipate the fourth quarter will reflect a record top line performance resulting in a strong operating margin in excess of 20% to conclude the year. Continuing with our financial outlook on Slide 7 and starting with our EPS guidance Building upon our strong first half performance, we've increased our full year 2026 diluted EPS guidance to a new range of $15.10 to $15.40, up 14% to 16%. And based upon the timing of sales and profitability, as previously discussed, we expect our third quarter 2026 EPS will be on par sequentially with our second quarter 2026 results, followed by a strong finish to the year. And lastly, turning to free cash flow. Based upon our strong second quarter and first half free cash flow and the confidence that a full year outlook and now project record free cash flow of $585 million to $605 million. Please note that this guidance includes a nearly 30% increase year-over-year in capital expenditures associated with ongoing growth investments which will be more than offset by strong growth in earnings and a record level of working capital as a percentage of sales below 18% as we continue to deliver a free cash flow conversion rate of approximately 105% again this year. Now I'd like to turn the call back over to Lynn.

Thank you, Chris. And turning to Slide 8. As we have discussed today, the team continues to deliver tremendous results under our Pivot to Growth strategy, reinforcing our confidence in achieving record financials across all major metrics in 2026. In meeting these objectives is supported by the strength of our order book -- priorities, focused investments back into the business and our commitment to drive sustained margin improvement. At the same time, we are targeting record levels of profitability and are delivering strong results as we continue to accelerate investment in R&D at a faster pace than sales. This steady drive for top quartile financial [Audio Gap] in our ability to compound earnings and mid pace -- teams pace over time. It also supports our ability to deliver strong and consistent free cash flow generation for our shareholders and drive strategic investments in growth CapEx across the portfolio. These efforts will ensure that our workforce and factories have the necessary tools, systems and resources to continue to drive strong growth in sales and operational efficiency. I wanted to highlight one of those critical investment opportunity shared in the recent press release. In July, we announced an $80 million multiyear investment to expand our Pennsylvania facility within our Enable and Power segment to support growing market demand across our naval businesses and also in anticipation of future commercial nuclear awards. This expansion, which began in 2025 will be financed through various channels, including internal capital investment, Maritime Industrial base or MID funding and state assistance. Regarding the mid funding, we -- we've spoken quite a bit about it recently and the growing support from our U.S. Navy customer. This continues to accelerate, and Curtiss-Wright now been awarded approximately $95 million in industrial-based funding to date. Note, this or value was $70 million as of the end of March. Overall, this funding provides us an opportunity to gain increased content and potentially become a second source to further support our customers' efforts as they look to expedite production on U.S. Navy's most critical platforms. This is one of many investment opportunities that we have been pursuing across our operations to position Curtiss-Wright for long-term growth. Turning to the right-hand side of the slide and taking a broader perspective across Curtiss-Wright's entire portfolio, we continue to build momentum. Our teams remain on executing in the short term while investing to capture the strongest medium- and long-term growth vectors globally in the markets in which we compete. While the slide outlines many of the meaningful end market drivers, while director focused to the commercial nuclear market. For those less familiar, Curtiss-Wright possesses long-established and significant commercial nuclear expertise dating back to the industry's inception. Today, our technology support the entire life cycle from the new build to the aftermarket. The company's extensive portfolio of aftermarket technology supports the continued performance, safety and modernization of operating reactors worldwide, including content on every reactor across North America and South Korea. In the U.S., the administration has exhibited a clear dedication to expediting life extensions of existing nuclear facilities and expanding the reactor fleet with the goal of quadrupling U.S. nuclear generation capacity to 400 gigawatts by 2050, including restarts and new builds. Curtiss-Wright remains well positioned to serve this massive acceleration in demand. Established foundation, we also anticipate a substantial near- and long-term opportunity to support the construction of Westinghouse's AP1000 reactors. On that front, AP1000 efforts in the U.S. continued to advance. In June, the Department of Energy issued a conditional [indiscernible] Office of Energy dominant financing to support the deployment of up to 10 new AP1000 reactors. The loans are expected to finance long lead equipment purchases for up to 5 projects with 2 reactors at each site, potentially bringing all 10 reactors under construction by 2030 which remains in line with the President's 2025 executive order. It is anticipated that the long lead equipment purchases would include Curtiss-Wright reactor coolant pump and that these components will be procured prior to the projects reaching final investment decision. As a proof point, I'd like to highlight something which is not directly within the public site regarding the progress being made between Westinghouse, the Department of Energy and the launch customers. During the month of July, one of the DOE's initial launch customers, which we cannot name, visited our operations and they were overwhelmingly impressed with the quality of our critical manufacturing processes and our preparedness to support the impending build-out of AP1000 reactors. Overall, we continue to expect an AP1000 quarter this year. We remain excited for the opportunity to support the build-out of 81,000 reactors, not only domestically through the DOE also through the Department of Commerce and across Eastern Europe and internationally. We intend to fully capitalize on the tremendous growth ahead in our commercial nuclear power business. In summary, we anticipate another record financial performance this year, driven by the team's steadfast focus on execution. We can confidently state that we are on track to exceed all of the major financial metrics issued at our 2024 Investor Day at the top and bottom line. Looking forward to the coming year, we expect to share updated long-term financial targets during our next Investor Day, which is currently being planned for the second quarter of 2027. The future remains extremely bright as the momentum continues to build to Curtiss-Wright right across all these end markets and we remain well positioned to continue to deliver long-term value for our shareholders. Thank you. And at this time, I would like to open up today's conference call for questions.

[Operator Instructions] Our first question today comes from Nathan Jones with Stifel.

Orders have been exceptionally strong for several quarters here in the $1.1 billion to $1.2 billion for the last 3 quarters, which is significantly above the revenue level that's averaging kind of $925 million in the first half of '26. Can you talk about the duration of the backlog and how we should expect those strong order rates to trend into higher revenue levels?

Yes. Thanks for pointing that out, Nathan. I mean it is -- we are really, really pleased with what's happening here in the order book, and you can see the momentum. And I'll start by saying, I think Q3 is shaping up to look pretty good as well. But when you step back and you take a look at what's happening in the Curtiss-Wright order book, there's a few dynamics at play. Number one is just kind of the alignment of our technologies to the overall strength in the defense budget here in the U.S. and also internationally. But if I dive a little bit deeper into that, we started off the year talking about some of the delays in the Defense Electronics order book associated with the CR. We were forecasting earlier this year that it would take about 60 to 90 days for that to kind of clear itself up. And given the strong Q1 orders in BE that were up 18% year-over-year, and now what we saw here in Q2, we got the record in orders being up 47% year-over-year, that's corrected itself. But embedded within some of the Defense Electronics order book, there are some things that are a little bit longer term in nature. We have the C-17 program press release that we talked about earlier this year. That's a multiyear. We had an incredibly strong second quarter order book within Ground Defense, and that included some long term production orders relative to Turret Drive stabilization systems, and we're seeing some things pick up just overall on the the R&D front. And that all speaks very positively not only to this year, but then as we look outward. And then looking across commercial aerospace, continued strength following the ramp and what's happening across the Boeing and Airbus and then talked a little bit on the call here, too, about general industrial. We saw a strong surge in orders in Q4. We saw a strong surge in orders in Q1, here again in Q2. And the order book there is up 21% year-to-date. And again, that business is having a strong July, again, 1 month. But yes, the order book is very strong. I think it's what's happening here in the current year, but also as we look forward into 2027 and beyond.

I guess the second question I'll ask is on supply chain. [Audio Gap] obviously, very high demand for chips and electronics and things like that, these days from data center demand. I know you guys generally are in a priority position given the industries that you're in and managed through it extremely well during COVID. But can you talk about any challenges that you're seeing in the supply chain, any inventory prepositioning that you're doing or anything like that, that we should be thinking about?

Thank you, Nathan. And it's a very worthy topic to bring up because the supply chain pressures have definitely increased in the first half of this year and I wouldn't say it's back like COVID, but there are some similarities to back into 2022. But as we talked about back then, we've learned a lot of things back in 2022, we installed a bunch of different pools, took on some different approaches to how we managed our inventory. And those are serving us well, and I think we're in very good shape. Really, the team is we're largely secured for our 2026 revenue and the real focus at this point is positioning for 2027. So I feel positive about that. But we talk about things you mentioned -- and we've also mentioned also the relationships we have with our supply base that we really focused on in a new and different way back in 2022. And kind of a recent example of where that's playing out that some of our leadership attended a meeting in Virginia on May 22, it was initiation of the Alpha-1 DDR made in America event at the Micron facility that was attended by the CEO of Micron and the Secretary of Commerce. So a really big deal. And during that time, with the presence in their understanding of what we do, we have been assured that we have priority allocation out of Micron. And that's just one example, but it's in the press. So it's something that people can look at that I thought would be fun to mention for the work that this team is doing. But it's -- it's very systematic, and it's across the board, and they collaborate across defense electronics very much with the industrial team, who also has dependencies on the electronics industry, and we make our power of our business work together in that area. And it's not just Electronics, I would mention that there are some pressures on some rare earth materials like across our surface treatment business. We used a couple a -- couple of compounds that have become under pressure. And again, there, the team is figuring out where -- which ones are going to have dual sources and then also qualifying other powders with the customer bases to make sure we can support ongoing production and they're doing a good job with that and where there can be movements or making sure we're adjusting our price -- the increased pressure on the supply chain. So it's not something you never take your eye off of, but the team is doing a great job of managing it.. [Audio Gap] are really strong, just uplift the whole organization and are overshadowed by covering maybe some other areas that's not growing. So things are absolutely great. I really emphasize that we've been investing in R&D. It pays faster than sales for the past 5.5 years and 6 years by the end of this year. And the team knows where to invest to drive growth. And -- when you think -- one of the things I think that's a perspective that helps you understand why the future is so bright is our industries are the long-term industries. And when we bring new products forward or work on custom projects with customers, it takes several years for those to turn into production revenues. And when you think of when we started this and how you've seen our growth build and grow over the past several years in the Pivot to Growth strategy, the early investments are beginning to pay off. We have just a compounding it of those investments we've made year after year and continues to pay that are going to build for the future. And I think our Investor Day in Q2 of next year is going to be pretty exciting until we will hold the thunder till then, as you know, we would. But I think the future is really bright for Curtiss-Wright.

Super helpful. And if I could follow up, you guys have also been very historically disciplined about how you run the business. When you think about defense end markets in commercial, you've also brought in that commercial style approach for your defense business. That's why you're getting a pretty good margin. I was wondering, as you see the new generation of defense tech companies, in the private markets where they succeed by moving fast, iterating quickly, getting capability into customer hands earlier but also investing more of their internal R&D and spending CapEx ahead of programs of record. How do you see that opportunity? Do you think that your business model lends itself to be more successful in potentially doing more of that kind of approach in getting technology faster to customers. Or do you see this as a potential win for market share or risk for margins? How do you think that ecosystem evolves?

So it's early days with it. But the thinking today is -- it's a great growth opportunity for Curtiss-Wright. And I'd say that for some very specific reasons. And that is -- if you think of what most of the nontraditional defense contractors are trying to do and the products they're promoting they are end products that will be delivered to our military. They are UAVs, they are underwater vehicles, they are ground vehicles, they're different weapons capabilities. And not many of them are focused on the Tier 2 and Tier 3 type of supply chain, which is really where we play. We are a Tier 2 and the Tier 3 supplier, and that's not the focus out of those. And their mantra is quick nimble, agile, fast and what supports that better than cost capabilities that we have across our portfolio, specifically in Defense Electrics, but also some of the capabilities out of our A&I segment. also move specifically. But we can get them products that they can use as part of their delivering those end systems in weeks where the development cycles for these products are well over a year or 2 years or even longer. And so from our standpoint, it's increased opportunities for different levels of capabilities and additional customers. And the other element I would say is that we have done very successfully over the past 5 years, that makes that even more relevant is, we've always had really some of the state-of-the-art technology, and we talked about our NVIDIA processing line with the backload chips and such that are really geared for some of the most complex systems that the militaries are needing. But we've also very much broadened our product offering to work very much across the size, weight and power offerings to be able to have products at different price points with different weights and different processing capabilities that fit a much broader range of products. And so when you think of the types of things these guys -- a lot of the nontraditional defense contractors are bringing to market, just most complex radar systems. There are more nimble things. And I think our product offering has the span that very much fits that wide range of capability needs. So I feel we're very well positioned. Our sales team is very active and being engaged across the U.S. with many of these different companies and were sought after as a supplier to them.

Our next question will come from Jan Engelbrecht with Baird.

Chris, Jim, congrats on another set of strong results. I think I'll start with Aerospace and Industrial. I think the guidance implies around 20% second half margins, and I think you did around 17% in the first first half. Just sort of -- can you just describe the various puts and takes. It does look like aerospace, defense, but commercial aerospace looks like it's down around 8% sequentially despite Boeing and production rates going higher. So I just wanted to understand that better .

Yes. So I think as we step back and just specifically talk about Commercial Aerospace, mean we continue to see strong growth in orders. We're planning to be up -- we're up 11% here in Q2. And we feel very confident in the guide of 10% to 12% on the full year. As you take a kind of a more holistic view across the Aerospace and Industrial segment, and we did just recently lift our sales guidance. We raised it another $15 million to $17 million, and that was primarily driven by what's happening in Aerospace, Defense and then also General Industrial. We definitely expect to see continued strong revenue growth in Commercial Aerospace going forward. And with some of the good things that are happening in there from a margin perspective and absorption is part of that, but mix is also part of that story. We're going to see -- you'll see that we raised our margin 10 basis points or $3.5 million. So that sales volume absorption is in line with historical levels, 20% to 25% on the higher sales, but favorable mix in products. And you've heard us talk a lot about EM actuation that's another example of commercial technology being spun off into the Defense space, and that's got great margins that are associated with it. We're also getting equally strong uplift this year from our current year and prior year restructuring actions. And despite that, I mean, we still are investing in Research and Development. We'll see that increase here in the back half, and we'll deliver 100-ton to 130 basis points of margin.

Perfect. And then if I may, a quick follow-up. Just if you look at the second half for Defense Electronics, strong growth, it looks like high single digits, low double digits. Just how much of that second half revenue for that segment? Is it already -- can you give us a sense of how many sort of book and ship business that you still need to sort of book in the second half to meet the guidance?

Yes. I would -- I'm not going to provide an exact percentage of sales and backlog figure. We are very well positioned following the record second quarter. And as I had mentioned, Q3 is expected to be very strong as well. I think as you take a look at the second half revenue profile really what you're seeing there, and we talked about this on last quarter, is the pressure that's associated with the timing of those orders coming in and the ability to quickly turn that here at year-end. So we will see relatively flat revenues to down in Defense Electronics share in the third quarter, sequentially from Q2, and we will have a big fourth quarter. We've had those in the past. We've been doing a lot of work to make sure that we're not facing those. And -- but unfortunately, just given the timing of the orders, it's going to be a big fourth quarter for that business.

We'll go next to Myles Walton with Wolfe Research.

Lynn, Chris Jim, you have on for Myles. You guys had contracts on for subs. What if any flow-through have you seen from these? Or do ...

So there was a lot of press around that. And it's great to see. It shows the commitment in the willingness of the government to make sure the industrial base is funding starting at the shipyards, which is where the big announcements were around that $77 billion going to our 2 main shipyards. Really, that was a fully funding work that is in our pipeline, of which some were already under contract for. So, it's good for the industry. It's good for the shipbuilders, which is good for Curtiss-Wright. So I don't want to minimize it, but it isn't a dramatic change in our order flow or how our business is going to transpire over the next couple of years.