Textron Q3 Earnings: Sustained Tough Macro Conditions Force Company To Lower Guidance

by Trefis Team
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As expected, Textron (NYSE:TXT) reported a rather mixed earnings this time around. While earnings came in higher than expected, revenues fell short of the analyst estimates marginally. That said, revenues came in 7% higher than the year ago figure on better performances at Bell, Industrial, and Textron Systems segments.

In general, the financials in the year have been hurt on deteriorating global economic conditions, rising oil prices, and increasing competitive pressures. Similar conditions are expected to persist into 2018, as well. It is for this reason that the company has decided to lower the upper end of its guidance for FY 2017. Management now expects the company to generate earnings in the range of $2.40-$2.50 per share, in comparison to the previous guidance range of $2.40-$2.60 per share.

 

Key Takeaways:

  • Business at Textron Aviation suffered in the quarter on the back of lower-than-expected military and commercial turboprop volumes. Revenues at the segment came in about $44 million lower in comparison to the same period last year. That said, the segment’s international delivery figures came in better in comparison to the first half of the year. Additionally, at the recent NBAA, the company celebrated their delivery of the 100th Citation Latitude, making it the best-selling midsize aircraft in the market at the moment. Textron expects the program to carry the segment’s top line going forward.
  • After multiple quarters of bad results, things at Bell seem to have finally worked out. Segment revenues were $812 million, up from the year-ago level of $734 million on higher commercial deliveries. The segment managed to deliver 39 commercial helicopters in comparison to 25 units that were delivered in the same period last year. Segment profits improved 9.3% to $106 million on favorable performance. Bell’s order backlog at the end of the quarter was $5 billion, down by $413 million from the preceding quarter.

  • As expected, revenues at Industrial jumped by close to 18%, primarily reflecting the inclusion of Arctic Cat in its books. However, overall business at the division suffered on lower production outputs, especially in the vehicles business. Additionally, margins came in lower, primarily due to the diluting impact of the Arctic Cat acquisition and unfavorable volume and mix in other business. That said, management expects things at Industrial to improve notably in Q4.
  • At Textron Systems, revenues grew by a sizeable 10% year-over-year, primarily due to higher deliveries at Marine and Land Systems, offset partially by lower volumes at the segment’s Tactical Armored Patrol Vehicle (TAPV) program. Textron Systems’ backlog at the end of the quarter was $1.5 billion, down by $85 million from the end of the second quarter of 2017.

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