What Will Drive Textron’s Near Term Growth?

by Trefis Team
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While lagging through some of 2017, Textron (NYSE:TXT) managed to start the financial year off with a bang in 2018. The momentum it gained through the first quarter, pushed through to Q2, and we expect the remainder of the year to see good growth figures as well. In general, the company’s financials have benefited primarily due to higher contributions from the Textron Aviation and Industrial segments. Due to the conglomerate’s stellar performance in the year thus far, the management decided to raise its earnings guidance for the full year. Textron now expects earnings from continuing operations to come in the range of $3.15-$3.35 per share, representing an increase of about $0.20 per share from its previous outlook.

We have created an interactive dashboard What Is The Outlook For TXT on the company’s expected performance in 2019. You can adjust the revenue and margin drivers to see the impact on the company’s overall revenues and earnings.

After a significant lull over the last few quarters, Aviation seems to have finally gotten a footing once again. In the first quarter, sales at Aviation grew by about 4%, while the top line jumped by a notable 9% in Q2. The improved performance is primarily a result of a better pricing environment and increased volumes, especially at turboprop. To put this into perspective, in the most recent quarter, the business was able to deliver 48 jets, about two more than last time, and about 47 commercial turboprops, up massively from 33 in the previous year. We expect this momentum to carry through the remainder of the year as well. Solid order growth and improved delivery figures will see revenues at the segment jump modestly.

Through the first half of FY 2018, Textron introduced a number of new innovations at Industrial that are expected to boost sales. For starters, the segment introduced a number of new models of its E-Z-GO Express personal transport vehicles. It also released new variants of the Cushman Shuttle personnel carriers and the pure-utility Textron Off Road Prowler Pro vehicle. All these new innovations, plus synergies from Arctic Cat are expected to buoy the top line well into 2019.

After a sluggish few quarters, Bell had been showing a reversal trend over the last few months. In fact, in Q1 alone, the segment produced an 8% growth in revenues. That said, it seems as though this reversal was short lived. Commercial helicopter order influx reduced in Q2, while contract inflows at its military programs from the Pentagon slowed. For these reasons, growth at the division was limited in the time period. Regardless, we expect the division to contribute positively to the overall top line in the coming months.

All in all, it seems as though Textron has positioned itself well for future growth. With increasing demand for its products and potential sales from newer innovations, we expect the company to produce better than expected results going forward, and in 2019.

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