What Can We Expect From Textron’s Q3 Earnings

by Trefis Team
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Textron (NYSE:TXT) is all set to report its third quarter earnings on October 19. In the first half of the year, the company was plagued with deteriorating global economic conditions and rising oil prices. Things are expected to move along in a similar momentum throughout the remainder of the year, as well. We can expect the revenues and earnings to remain relatively flat. Aviation and Systems could see revenues shrink again on the back of lower product deliveries, while sales at Industrial could show good top-line figures on the Arctic Cat inclusion.

In the previous call, the company reiterated 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. We can hope to learn more about this in the upcoming earnings call.

Possible Takeaways:

  • Industrial is set to shine yet again. We can expect revenues at the segment to benefit significantly from the acquisition of Arctic Cat that was completed earlier in the year. The acquisition significantly helped Textron enhance its footprint in the outdoor recreational and utility market, while greatly increasing its product offerings overall. Additionally, the growth at the segment could be further boosted by the company’s continued deliveries of the highly efficient ELiTE series lithium golf carts that began in Q1. Since its introduction, Textron has managed to deliver more than 8,000 units.
  • In the previous quarter, revenues at Bell finally pushed themselves into the positive on higher military volume, as order flow in the commercial space also improved significantly. We can expect a similar momentum continuing into Q3, as well. On a side note, the company finally received FAA certification for its Bell 505 Jet Ranger X. As orders continue to swell, we can expect sales from the aircraft to significantly drive the top line in the future.

  • Recently, Honeywell received certification for the engines it intends to use in Textron’s Longitude aircraft. This news represents a notable step in the direction of the aircraft’s final certification that is expected to come later this year. Given the heavy superiority of the aircraft, we expect sales from the jet to help buoy the top line over the long term.
  • That said, Systems could see sustained losses incurred at the Tactical Armored Patrol Vehicle (TAPV) program. The lower-than-expected TAPV production significantly hurt the company’s overall growth in Q1 and Q2. Similar conditions are expected to prevail in Q3 also, since there has been no notable improvement in the situation.

  • Slow turboprop production continues to remain a major point of concern for Textron Aviation. While jet deliveries have remained resilient thus far, deliveries of the King Air and the Cessna Caravan have lagged notably. Management has cited a slow international market as the main cause for the sluggish demand. We expect the demand to remain weak over the remainder of the year.

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