So, I think as we go to capture these great growth factors that we’re on and push ourselves in our growth for the future, it’s important to maintain that investment. And then beyond that, we have had a reduction in AP1000 year-over-year. We’ve talked about the profitability of that contract. I won’t get into the numbers again on that, but that’s a $20 million year-over-year headwind that we’re facing within the naval and power segment. So, I think at 10 to 30 basis points year-over-year, if you pull back some of these items, there’s a lot going on in the organization, not only from a pricing perspective and commercial to push forward commercial and commercial excellence, but also operational excellence to support that investment that we’re doing for the future.
Nathan Jones: So, if we stripped that all of the kind of discrete things that are going on, your position is that you’re still in that kind of 25% to 30% core absorption, core incremental margins on growth?
Chris Farkas: Yes.
Nathan Jones: And, I mean, the CAP1000 headwind is going to decline year-over-year going into 2024, just because the contracts running out of revenue to decline off of. You guys have made a commitment to continuing to invest in growth. Should we expect further headwinds to the margin line? Obviously, I understand now they’re getting paid back at growth in 2024 for an increased investment there. Just how should we think about the puts and takes there as we go into 2024?
Chris Farkas: Yes. We are certainly still on the journey and what we set out to accomplish here in Investor Day. I mean, there’s a lot that goes into answering the question as to where you’re going to be in 2024. We’re still actively engaged in our strategic planning process and evaluating some of these investment opportunities that’s been in front of us this next year. But, I mean, specifically, as you brought it up, I mean, as you look at naval and power margins going forward, I think the positives here are that we’ve got a real solid naval defense outlook, including a ramp from the Columbia-class submarine. We’ve got this new business integration with our resting systems business that is going very well. We’re seeing FMS sales growing.
We shouldn’t have no AP1000 headwind this next year. I mean, boy, it would be nice if something happened a little bit sooner on those orders. We’re still forecasting two to four years, but we know that will be an accelerant when it hits. And we’ll have a tail end and a benefit from this small naval contract adjustment that we had here in the third quarter. So, we’ll get through this strategic and planning process here in the fourth quarter. We’re going to look at these R&D investment opportunities that are in front of us in the advanced SMR, subsea, advanced naval tech-type technologies, and absent investments in R&D or other factors, and we’ll get to that incremental 25% to 30% as we have in the past. So that’s how I would look at that.
Nathan Jones: That’s helpful. Thanks. I think it’s important for people to understand what the call looks like. So thanks very much for taking the questions.
Lynn Bamford: Thank you. Nathan.
Chris Farkas: Yes, thank you.
Operator: Our next question comes from Peter Osterland with Truist. Your line is open.
Peter Osterland: Hey, good morning. I’m on for Mike Ciarmoli this morning. Thanks for taking our questions. The first thing I wanted to ask, on the book-to-bill for the quarter, I was wondering if you could provide some more detail on what that looked like by segment or by end market. I’m just trying to get a sense for how strong orders were in defense electronic and if there are any markets you would call out where order trends that are showing any signs of relative weakness? Thank you.
Chris Farkas: Yes, so there’s a lot to unpack in that question. So let me start off and say, at the total purchase rate level, we were approximately 1.2 times book-to-bill, and that’s on very strong sales growth of 15%. As you look across the three segments, aerospace and industrial was about a one times book-to-billion. The defense electronics was 1.3 times book-to-bill, and that’s really the third consecutive quarter for that segment. With very strong book-to-bill, I mean, they were 1.2 times in Q2, 1.4 times back in Q1. Last 12 months of order is $983 million, so some very strong things happening there on top of very solid sales growth. And then, the naval and power segment about 1.2 times. The book-to-bill is a little bit stronger in the defense markets.
We’re still at about 1.1 time in commercial aero. Commercial markets are really kind of a balance, right? And we’re seeing some very strong growth that’s taking place in orders of 15% in our nuclear sub-market. We’re seeing mid-single digit growth here in Q3 in the process markets, but high above that on a year-to-date basis. We’ve talked a little bit about the industrial market, and what we’re seeing there in the past. I think the positive is that while we’ve been in a fairly steady decline on a very strong order book since the highs of 2021, here in Q3 we flattened out a little bit as we had projected. We’re dealing with a little bit of slack in our customers inventory. That seems to be balancing out. We’ve got some new product introduction, but I think that is going to help that going forward.
And commercial aero continues to be very, very strong, so, no concerns in that regard. We continue to produce and expect to produce an alignment with the trajectories that Boeing and airbus laid out for their critical platforms.
Peter Osterland: Perfect. Thanks for that detail. And then just one follow-up on naval defense. Have you seen any signs of increased activity or conversations around AUKUS? And do you have any updated expectations around timing for when that could potentially be additive to that business?
Lynn Bamford: There’s definitely a lot of activity happening in the background around AUKUS and figuring out how those submarines are going to be built and replaced. A lot of those were not really in the pre-hand to speak to, but, we said, you know, kind of over the past year that the plan for AUKUS is not very clear. Well, it is becoming more clear. I can say that for sure. And we continue to know it’s going to be a very good tailwind for Curtiss-Wright in our business, but really the timing and the details is not something we can freely speak to.
