Textron Could Witness A Slow Start To 2017

Textron (NYSE:TXT) is all set to report its Q1 earnings on April 19. The company posted decent figures in 2016, despite ending the year with Aviation and Bell in the red. Industrial and Systems helped provide buoyancy to the company in the final quarter, where it missed the earnings and revenue consensus estimates by quite a margin. Given the current macro economic climate, we can expect a similar result this quarter, as well. For the first quarter, analysts estimate the earnings per share to come in around $0.46 on $3.19 billion in revenues. For the full year, the conglomerate expects earnings of $2.50 to $2.70 per share on revenue of $14.3 billion, below analysts’ expectations of $2.93 per share on $14.4 billion in revenue.

Probable Highlights:

• The Industrial segment had been the shining star in 2016. The company managed to post positive results in the segment throughout the previous financial year. Furthermore, the segment is expected to witness a further boost to the top line this quarter on the conclusion of the Arctic Cat acquisition for $247 million. This buyout will not only expand Textron’s existing product portfolio, but will also help enhance its footprint in the outdoor recreational and utility market, courtesy of Arctic Cat’s established dealer network.

• At Systems, the company posted positive sales figures in the last quarter on higher-than-expected sales volumes. Given the increased Tactical Armored Patrol Vehicle (TAPV) deliveries, we can expect to see good results in the yet-to-be-announced quarter as well. That said, the top line could be partially offset on the back of lower sensor fuzed weapons (SFW) activities.

• In the commercial segment, the company could see solid deliveries of the new 505 Jet Ranger X, which earned certification from Transport Canada Civil Aviation at the end of 2016. Additionally, the FAA is likely to give its certification for the copter soon enough. Furthermore, the company expects to witness stabilized market conditions on account of improved order flow.

• Additionally, Textron’s new V-280 Valor program is on track to record its first flight this year. Going forward, maintaining a flow of new product offerings will ensure competitiveness and order growth. In general, the company expects to close further foreign military deals through the year.

• That said, the company has been seeing subdued results in the past couple of quarters, in many of its end markets, with no significant improvement expected in the near term. Additionally, the company has incurred a $50 million charge on its recently adopted Scorpion program, part of which could be paid out in the first quarter itself, which could hurt earnings.

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