How Did Textron Perform In Q1?

by Trefis Team
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Textron (NYSE:TXT) managed to post quite a stellar quarter this time around. The company beat both the earnings and revenue consensus estimates very comfortably. While sales jumped by a modest 7%, earnings from continuing operations per share came in at around 72 cents, representing a mammoth 95% increase over the same period last year. The company cites a significant increase in sales of its business jets and turboprop aircraft as one of the main profit drivers. Further, it was announced on the call that the conglomerate has decided to sell its tools and test electronics segment, for about $810 million, to Emerson Electric. The deal is expected to close sometime in Q3.

The company’s stock price jumped post the earnings call by about 7%, and at the time of writing this article, was trading around $65. While this price does fall in line with our pre-earnings price estimate, we now believe that the stock price has more room to grow.

In this respect, we have revised our previous estimate, and created a scenario on an existing interactive dashboard analysis to estimate Textron’s latest valuation based on its expected revenue for FY 2018. Click on the link to modify the figures to arrive at your own price estimate.

Highlights:

  • Probably the biggest news coming out of the quarter is the company’s decision to sell its tools and test business to Emerson Electric for $810 million in an all cash deal. This comes as very welcome news for investors who have wished for the company to consolidate its business in an effort to regain consistent profitability, which has lagged in the past few quarters. We expect to learn more about the deal in the upcoming quarters.
  • Sales at Aviation grew by about 4% in the quarter to about $1,010 million. The rise in revenues is primarily attributable to the significant jump in commercial turboprop deliveries. In general, the company managed to deliver 29 commercial turboprops in comparison to the 20 from a year ago. Further, the segment also saw its earnings almost double year over year to $72 million due to favorable volume and mix, performance, and price.
  • Bell and Industrial continue to show a marked, and consistent, improvement in their performance this quarter. Segment revenues at Bell were $752 million, up about 8% year over year on higher military volumes, partially offset by lower commercial revenues. Similarly, segment revenues at Industrial grew 14% to $1,010 million driven primarily by favorable foreign exchange, the Arctic Cat acquisition, and higher volumes across each business line.
  • In contrast, revenues at Systems during the quarter came in at about $387 million, down from $416 million a year ago. This decrease in revenue was mainly the product of lower volume at Weapons & Sensors driven down by the discontinuance of SFW production in 2017.
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