Textron Earnings Review: Strong Aviation Performance Pushes Overall Revenue Growth

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Textron (NYSE:TXT) annouced its first quarter results for 2015 on Tuesday, April 28th. The multi-industry company reported an overall revenue growth of 7.9% driven by increased volume in the aviation segment. [1] Bell helicopter revenues continued to witness a decline, while the industrial segment’s revenue growth was partially offset due to currency headwinds.

Earnings from continuing operations at the end of Q1 2015 stood at $0.46 per share, displaying an impressive 48% year-over-year growth. [2] However, at $0.46 per share, earnings from continuing operations lay in the lower end of analysts’ expected range of $0.44-$0.56 per share. [3] At the end of the first quarter, Textron believes it is on track to achieve its issued guidance of EPS from continuing operations ranging between $2.30-$2.50 for the full year. For full year 2015, the company believes that the falling revenues and margins from Bell will be more than offset by strong performance in the aviation and industrial segments.

We currently have a price estimate of $43.24 for Textron, around 3% below its current market price. However, this will be updated shortly in light of the recent earnings release.

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See our complete analysis of Textron here

Strong Aviation Performance Driven By Beechcraft Acquisition; Industrial Segment Reports Growth Despite Currency Headwinds

With the acquisition of Beechcraft in 2014, Textron witnessed its market share increase from approximately 19% to 27% between 2013 and 2014. The continued impact of this acquisition along with the uptrend in the global aviation market was visible in the financial results posted for Q1 2015. Revenue at Textron Aviation witnessed double-digit growth, with a whopping $266 million increase on a year-over-year basis. Segment profit increased from $14 million in Q1 2014 to $67 million in Q1 2015, primarily driven by more efficient performance due to the Beechcraft acquisition as well as higher volumes. In Q1 2015, Textron delivered 33 new jets and 25 King Air turboprops, compared to just the 35 new jets in Q1 2014. [1]

Industrial segment reported a $75 million increase in revenues or approximately 9% growth on a year-over-year basis. This growth includes a $62 million unfavorable year-over-year impact from foreign exchange due to a stronger dollar. Segment profits grew 24% on a year-over-year basis, driven by higher volumes. [1]  Textron expects the aviation and industrial segments to continue to outperform the other segments and boost overall growth through 2015.

Bell Helicopter Drag On Overall Revenue Growth

Bell Helicopter posted a revenue decline as military spending and commercial helicopter markets continued to remain weak. In Q1 2015, Bell delivered 6 V-22’s and 4 H-1’s as compared to the 8 V-22’s and 5 H-1’s in Q1 2014. Driven primarily by lower V-22 deliveries, the segment reported approximately 7% fall in revenues and 21% fall in segment profits on a year-over-year basis. [1] Military spending is expected to remain weak through this year and witness recovery from 2016. Global commercial helicopter market is also expected to continue to remain soft through the rest of this year. Consequently, Textron has stated that it will be adjusting production levels and engaging in cost-cutting activities to ensure that Bell’s margins for 2015 remain within the targeted range of 11-12%. [1]

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Notes:
  1. Textron Reports First Quarter 2015 Income from Continuing Operations of $0.46 per Share, up 48.4%; Revenues up 7.9%, Textron [] [] [] [] []
  2. Q1 2015 Earnings Presentation, Textron []
  3. Textron Inc. Analyst Estimates, Yahoo! Finance []