Markets
TXT

Textron's Strategic Moves Impress; DoD Budget Still a Concern

On Oct 16, 2015, we have updated a research report on Textron Inc.TXT .

Textron is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools. The company is also a provider of solutions and services for aircraft, fastening systems, and industrial products and components. It is also a commercial finance company in select markets. Textron operates through five segments - Bell, Textron Systems, Textron Aviation, Industrial, and Finance.

Textron's geographically diverse network of aircraft, defense & intelligence, industrial and finance businesses negates any specific business risk. The company is known globally for its most recognizable and valuable brand names, such as, Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee.

The company is known to acquire assets in the same line of business as its own, thus helping it to expand its core offerings. In Jan 2015, Textron took over the Douglas Equipment business from Curtiss-Wright Flow Control (UK) Ltd., complementing its TUG brand. UK-based Douglas Equipment supplies ground support equipment to airline companies. Post acquisition, it became part of the Textron Specialized Vehicles group and continued manufacturing from its UK facilities. This strategic acquisition program will enable Textron to leverage its existing distribution network to gain market share and realize synergies.

Textron continues to strengthen its international presence. In an attempt to focus on improving its Asian business, the company has set up a sales office in Japan. Also, in order to strengthen its presence in Europe, it opened a combined Hawker, Beechcraft and Cessna service center at the Paris Le Bourget airport in Europe. Because of its sustained efforts in global expansion, the company witnessed a substantial increase in revenues from almost all of the regions in which it operates (the U.S., Europe, Latin America and Mexico, Asia, Australia and Canada, barring the Middle East and Africa). Continued focus on geographic expansion will serve the company well in the long term.

On the flipside, Textron is expected to witness muted growth at Bell Helicopter. Soft V-22 Osprey shipments and weakness in the global commercial helicopter market are expected to affect segment revenues and dampen the top line in 2015. Textron had earlier witnessed higher V-22 shipments to the U.S. government, which boosted Bell's revenues. However, revenues at Bell are expected to suffer as these shipments slow down in 2015.

Budget deficits and political uncertainty make future defense budgets vulnerable to cutbacks, affecting the fortunes of the company. With plans afoot to axe almost half a billion in defense spending over the next decade because of a tepid economy, Textron's performance, not unlike the other defense primes, is bound to be affected.

Zacks Rank

Textron currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space include The Boeing Co. BA , Northrop Grumman Corporation NOC and Leidos Holdings, Inc. LDOS , each carrying a Zacks Rank #2 (Buy).

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

NORTHROP GRUMMN (NOC): Free Stock Analysis Report

TEXTRON INC (TXT): Free Stock Analysis Report

BOEING CO (BA): Free Stock Analysis Report

LEIDOS HOLDINGS (LDOS): 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 BA LDOS NOC

Other Topics

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