Diversified U.S. conglomerate,
) was awarded a $79.9 million contract for Foreign Military Sales
to Saudi Arabia. The contract involves modification for
procurement of cluster bomb units and associated training
rounds. The locations of the performance are Wilmington,
Massachusetts and McAlester, Oklahoma. Work is expected to
be completed by December 31, 2015.
We believe Textron should do well in its commercial aerospace
businesses with the gradual recovery in the economy. The
improving fundamentals in the commercial aerospace industry
should bode well for Textron's Cessna jets and Bell Helicopter
businesses going forward. Cessna's fortunes will improve mainly
due to high demand for light cabin business jets. Also, in the
near term, Bell's growth will be guided by a judicious mix of
military and commercial business from the V-22 Osprey and H-1
helicopters. Textron Systems will also see growth coming from
government's focus on UAVs (unmanned aerial vehicles) and ASVs
(armored security vehicles).
Also, Textron's geographically diverse network of aircraft,
defense & intelligence, industrial and finance businesses
negates any specific business risk. The company is known around
the world for its most recognizable and valuable brand names,
such as Bell Helicopter, Cessna Aircraft Company, Jacobsen,
Kautex, Lycoming, E-Z-GO and Greenlee. The company has a strong
presence in diverse areas of business jets and other general
aviation aircraft, helicopter, aircraft engines, golf carts, turf
maintenance equipment, electronic test equipment and blow-molded
fuel tanks. Textron continues to enjoy a strong backlog at its
Textron's balance sheet remains stable with a long-term
debt-to-capitalization of 55.9% at the end of the first nine
months of 2012. The company also ended the first nine months of
2012 with cash holdings of $1.2 billion, which, along with its
receivables liquidation expected to come through, would be enough
to keep the liquidity profile of the company in good shape.
Textron's balance sheet also improved following the shedding of
$496 million of long-term debt in the first nine months, leaving
approximately $1.8 billion of long-term debt.
We currently have a long-term Neutral recommendation on Textron.
The stock carries a Zacks #4 Rank (Sell rating) in the short run,
primarily due to the high-level of current valuation. The stock
is now trading at a premium in terms of forward earnings
estimates versus its diversified conglomerate peers like
Honeywell International Inc.
Carlisle Companies Incorporated
Based in Providence, Rhode Island, Textron Inc. is a global
multi-industry company that manufactures aircraft, automotive
engine components and industrial tools.
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