Textron Q1 Earnings: Slow Quarter Indicative Of What’s To Come In 2017

-0.80%
Downside
95.93
Market
95.16
Trefis
TXT: Textron logo
TXT
Textron

Textron (NYSE:TXT) reported earnings for the first quarter of FY 2017 yesterday. As expected, the company missed on revenues, while just meeting the EPS expectations. As in the last few quarters, Aviation and Bell have weighed on the top line yet again. Additionally, the revenues at the Finance segment also dropped by 10% year-on-year. Revenue growth at Systems and Industrial have helped offset the headwinds at other segments, albeit marginally.

Screen Shot 2017-04-20 at 4.15.46 PM

Aviation revenues fell substantially by about 11% year-over-year to $970 million primarily due to lower military and commercial turboprop volumes. However, the top line decline was partially offset by higher pre-owned volumes. The company managed to deliver only 12 King Air turbos this quarter, in comparison to 26 in the same quarter a year ago. The deliveries of the turboprop were hurt as customers in certain international markets deferred their purchases on the back of economic uncertainty and the relative strength of the dollar. That said, deliveries of the Citation aircraft were up by 1, coming in at 35 aircraft.

Relevant Articles
  1. What’s Next For Textron Stock After 10% Gains This Year?
  2. After A 17% Fall In 2023 Will RTX Outperform Textron Stock?
  3. With 10% Gains This Year Should You Pick Textron Over Lockheed Martin?
  4. Should You Pick Howmet Over Textron Stock?
  5. Should You Pick GD Stock Over Textron?
  6. Will Textron Stock See Higher Levels Post Q1?

Management has reaffirmed the segment’s forecast revenue to remain relatively flat at $5 billion. This comes after Textron said that it would spend less on its aviation business in 2017 due to weak business jet demand, earlier in the year. Backlog at the division was at about $1 billion in the first quarter.

Demand for corporate jets the world over have been depressed over the last few quarters as companies, oil tycoons, and billionaires cut costs in light of an uncertain global climate. Furthermore, the weak oil prices have hurt demand for commercial helicopters at Bell as well. That said, revenues in the segment were down almost 14% in the quarter mainly due to lower deliveries of the H-1 helicopters to the U.S. government. The company managed to deliver only 3 copters in comparison to the 10 copters it delivered in Q1 2016. However, management has cited “timing issues” as the major cause for the lapse in deliveries, expecting revenues to stabilize in the quarters to come.

As expected, Systems and Industrial have performed well in the quarter. Revenues at Systems were up almost 28% year-over-year driven by higher volumes at Weapons and Sensors and Marine and Land Systems. Industrial saw revenues rise by about 4.2% to $992 million driven by higher volumes at Kautex and synergies from acquisitions.

In general, 2017 is expected to be quite slow for the conglomerate that is vastly affected by the world economy and oil prices. Given that the global economic climate is unfavorable at the moment, we can continue to see the company suffer the implied consequences. The company reduced its full-year earnings to lie within the range of $2.40-$2.60 per share to accommodate for the costs associated with the latest Arctic Cat acquisition. Revenues are expected to remain relatively flat year-over-year.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research