Expect Little Change For Textron’s 3Q

by Trefis Team
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   Textron (NYSE:TXT) is expected to report its Q3 financial results 19th October. Textron’s earnings are expected to come in moderately higher on the back of recently acquired contracts. The revenue for the quarter is expected to be 1.3-1.5% higher y-o-y, and earnings per share are expected to come in at a similar range. This would be in line with the previous quarters and the market expectations surrounding the company’s backlog.

We currently have a price estimate of $57 per share for the company, that is 13% lower than the market price. View our interactive dashboard for Textron’s Outlook Over The Next Two Years and modify the key drivers to visualize the impact on Textron’s price.

 

Recently, Textron and Boeing were awarded a contract for $4.2 billion to build 58 units of the v-22 aircraft. Of the total sum of the contract, Textron will receive $2.2 billion. In addition to the DoD contract, the government of Bahrain has approved awarding Textron a contract to build 12 H-1 attack helicopters. This brings the backlog of the company to $8.3 billion for the quarter.

The aviation segment of Textron’s business, which accounts for 55% of its sales, is showing moderate to low growth. This is due to the fact that rising aircraft prices have seen demand fall below 2007 levels. Alternatively, the recent allowance of 100% depreciation on aircraft by the Senate could boost airline sales in the near term.

With little market activity and a generally sluggish aviation market, not much can be expected to change in this quarter’s earnings. With the prevailing environment, it may be that the stock is overvalued. Unless a significant turnaround occurs in the price of aircraft or in the demand for aircraft (where customers are willing to pay the high cost of acquisition), there is little expectation that earnings will turn around significantly.

 

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