What Can We Expect From Textron’s Q3 Earnings?

Textron‘s (NYSE:TXT) stock has been extremely volatile ever since the crude oil prices tumbled in 2014. Due to the weaker financial position of many of the oil companies, demand for business jets and helicopters has slowed considerably. That said, the company’s stock has suffered an unfair penalty. The general market perception of the private jet and helicopter market has clouded the fact that Textron actually makes money, while continuing to grow at a modest rate. The company has solid financials. One must only take a look at Q2’s numbers to understand this. The company managed to beat analyst estimates in both revenue and earnings.

Textron Aviation To Shine Amidst A Slowing Business Jet Market Thanks To NetJets

As mentioned previously, the business jet market continues to remain soft on the back of slowing GDP growth rates worldwide and a dismal oil market. Since this has a direct effect on corporate profit growth, which has suffered in many sectors so far, business jet usage has slowed this year. Despite this downturn, Cessna has managed to stay on top of things by making market share gains through some of its new business jet-programs and securing large orders.

Textron Aviation has managed to increase its sales in the two quarters this year after gaining traction for its new Latitude business jets, certified by the FAA (Federal Aviation Administration) in June 2015. The company secured a solid 150 orders from NetJets, a Berkshire Hathway company, and also a world leader in private aviation. As of now, 25 of the 150 orders have already begun rolling out beginning Q1 2016.

In the last quarter, sales at Aviation were up by almost 6% due to a greater volumes and product mix. We can expect a similar growth rate in Q2 as well.

Bell Could See Lower Revenue Figures This Quarter As Well, But For Different Reasons Than Before

That said, except he V-22 tiltrotor that Bell is developing in association with Boeing, Bell’s order backlog is dominated by military customers. Oil and gas end markets comprise only 2% of the total orders. Further, about 8% of the unit’s in-service fleet is exposed to oil and gas customers. Although there could be an affect on the aftermarket revenues in the short term, Bell is probably the best candidate among the helicopter manufacturers to skip the energy downturn.

At present, its major source of risk is most likely related to the Bell 525 crash which occurred in July earlier this year. Ever since then, flight testing for the aircraft has been put on hold while the National Transportation Safety Board examines the cause of the crash. The main rotor blades struck the tailbone and the nose, resulting in the death of both test pilots. Before the mishap, Textron was targeting its first delivery in 2017. However, the crash will likely create a variety of uncertainties and delays in FAA certification and, consequently, the delivery of the aircraft. This is bound to have a  negative effect on the segment’s top-line.

Analysts on average expect the company to earn $0.83 per share on a revenue of $3.42 billion. In the last three fiscal years, Textron has managed to surpass the quarterly EPS estimates 8 times. Revenues were in excess of the expected value in both quarters of the year so far. Given the aforementioned points, it seems likely that Textron is set to post yet another solid quarter this time around.

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