Markets
TXT

Textron Tops Earnings, Lags Revenues, Narrows Guidance

A generic image of a person holding out their hands
Credit: Shutterstock photo

Diversified U.S. conglomerate Textron Inc.TXT reported third-quarter 2015 earnings from continuing operations of 63 cents per share, beating the Zacks Consensus Estimate of 60 cents by 5%. The reported figure also increased 10.5% from 57 cents per share in the year-ago quarter, driven by solid margin contribution across all its segments despite the plunge in revenues.

Textron Inc. - Earnings Surprise | FindTheBest

Revenues

Total revenues in the quarter were $3,180 million, missing the Zacks Consensus Estimate of $3,389 million by 6.2%. Revenues decreased 7.3% from the year-ago figure of $3,430 million primarily on account of lower contribution from the Bell segment owing to declining deliveries of V-22s.

Manufacturing revenues decreased 7.1% year over year to $3,163 million, while revenues from the Finance division declined 32% to $17 million during the quarter.

Segment Performance

Textron Aviation: Revenues during the third quarter increased 7.3% to $1,159 million from $1,080 million in the year-ago quarter. This reflects higher jet and military volumes. The company delivered 29 King Air turboprops and 37 new Citation jets, compared with 30 King Air and 33 Citation jets in the prior-year period.

The segment registered a profit of $108 million compared with $62 million in the prior-year quarter owing to higher volumes and improved operating performance. Order backlog at the end of the third quarter was $1.4 billion, flat with the preceding quarter.

Bell: Segment revenues decreased 36% to $756 million from the year-ago level of $1,182 million due to lower V-22 aircraft deliveries along with lower commercial aftermarket volume.

The segment delivered 45 commercial helicopters compared with 41 units in the prior-year period. Bell also delivered 4 V-22s and 5 H-1s compared with the year-ago delivery of 12 and 4 units, respectively.

Segment profit also decreased 32.2% year over year to $99 million in the quarter. Bell's order backlog at the end of the quarter was $5.1 billion, up $338 million sequentially.

Textron Systems: Revenues from this division during the reported quarter were $420 million, up 17.3% year over year. The upside was mainly due to higher Unmanned Systems as well as Weapons and Sensors volumes.

Segment profit of $39 million registered a year-over-year increase of 44.4%, reflecting higher volumes.

Textron Systems' backlog at the end of the third quarter was $2.6 billion, down $142 million from the end of the second quarter.

Industrial: Segment revenues increased 5.5% year over year to $828 million driven by higher volumes. Segment profit increased 15.1% to $61 million.

Financials

As of Oct 3, 2015, cash and cash equivalents were $497 million, compared with $731 million as of Jan 3, 2015.

Capital expenditure during the quarter was $113 million compared with $83 million in the year-ago quarter. Long-term debt was $2,391 million as of Oct 3, 2015, down from $2,803 million as of Jan 3, 2015.

Guidance

Textron narrowed its 2015 earnings per share guidance range to $2.40 to $2.50 from $2.30 to $2.50.

The company reaffirmed its cash flow from continuing operations before pension contributions guidance in the band of $550-$650 million.

Other Releases

Raytheon Company RTN reported third-quarter 2015 earnings from continuing operations of $1.47 per share, beating the Zacks Consensus Estimate of $1.40 by 5%. However, earnings lagged the year-ago figure of $1.65 by 10.9%.

Upcoming Releases

Northrop Grumman Corp. NOC and General Dynamics Corp. GD are expected to release their third-quarter 2015 results on Oct 28, 2015.

Our Take

Textron is expected to witness a mixed macro environment this year as growth in its Aviation and Industrial segments will be partially offset by weakness in Bell Helicopters. Soft V-22 Osprey shipments and weakness in the global commercial helicopter market are expected to affect segment revenues and dampen the top line this year.

Textron had earlier shipped a higher number of V-22s to the U.S. government, boosting Bell's revenues. However, revenues at Bell are being hit by a slowdown in these shipments in 2015. The company, however, expects global commercial helicopter demand to bounce back this year, countering the negative impact of lower V-22 purchases by the U.S. government.

Textron expects revenues from its other segments comprising Aviation, Industrial and Systems to increase in the second half of 2015.

The company currently carries a Zacks Rank #4 (Sell).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

TEXTRON INC (TXT): Free Stock Analysis Report

NORTHROP GRUMMN (NOC): Free Stock Analysis Report

RAYTHEON CO (RTN): Free Stock Analysis Report

GENL DYNAMICS (GD): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

TXT NOC GD

Other Topics

Earnings Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More