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• After gaining 37% this year, the shares of Textron have surpassed pre-Covid levels despite an ongoing slump in the aviation industry. The company’s Aviation segment, which contributes almost 40% of total revenues, observed a 23% decline in 2020.
• In the recent earnings released, the company revised its full-year outlook for the Aviation segment downwards as business and international travel continue to be impacted by the pandemic.
• Textron’s four operating segments, Aviation, Bell, Systems, and Industrial contribute 38%, 24%, 10%, and 28% of the total revenues, respectively.
• The company’s Bell segment was the key revenue and earnings contributor last year largely due to procurement of H-1 and V-22 series aircraft by the U.S. government.
• The company’s order backlog declined by 3% from $9.5 billion in Q4 2020 to $9 billion in Q1 2021.
Textron is a multi-industry company that designs and manufactures civilian and military helicopters, business jets, turboprop aircraft, piston-engine airplanes, golf cars, off-road and light transportation vehicles, turf care equipment, power tools, and a variety of defense products. The company also provides financing to promote sales of some of its products, including helicopters and airplanes.
Textron conducts its business through five operating segments: Bell commercial and military helicopters, Textron Aviation (which includes Cessna and Beechcraft airplanes' business), Textron Systems (which includes the company's defense system business), Industrial (which includes the company's turf care equipment, golf cars, off-road and light transportation vehicles, and auto component business), and finance (which provides financing to purchasers of Textron products).
The company sells its products directly as well as through a network of independent dealers. For many of its product lines, including Bell helicopters and Cessna and Beechcraft airplanes, the company also provides maintenance, repair, and overhaul services.
Below are key drivers of Textron's value that present opportunities for upside or downside to the current Trefis price estimate for Textron.
The 'Cessna & Beechcraft Airplanes' and the 'Bell Helicopter' divisions together account for approximately 70% of Textron's valuation, as per our estimate.
Through its Textron Aviation segment, which includes Cessna and Beechcraft airplanes, Textron is one of the largest general aviation airplane makers in the world. General aviation airplanes include all airplanes not meant for scheduled commercial service or military purposes. The company has a strong presence in all three sub-segments of the general aviation market: piston-engine airplanes, turboprops, and business jets.
We figure with recovery in demand for business jets, higher demand for piston-engine airplanes from pilot schools, and rising global demand for agricultural turboprop aircraft, Textron could see its airplane sales rise in coming years.
Bell Helicopters is a well-established player in the global helicopter market. The company's portfolio has many commercial and military helicopters, which will help it maintain its market share in the coming years. In the commercial space, with demand for helicopters from the offshore oil & gas sector rising, Bell's sales could rise. At the same time, Bell's global sales and service network will also help it gain from the rising demand for helicopters from Asia-Pacific and the Middle-East regions.