Will Revenue Headwinds Weigh On Textron Stock In 2022?

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TXT: Textron logo
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Textron

The shares of Textron (NYSE: TXT) have observed a sell-off this year as rising benchmark oil prices and inflation are likely to make a dent in consumer discretionary spending. The company designs and manufactures civilian and military helicopters, business jets, off-road & light transportation vehicles, and a variety of defense products. With the WHO actively exploring the criteria to announce an end to the pandemic, easing of health & safety protocols has been paramount for governments to revive macroeconomic growth. However, Textron’s Aviation segment’s order backlog could observe a headwind from inflationary forces and a revival of suspended air travel routes by domestic carriers. Thus, many passengers opting for private jets during the pandemic are likely to switch back to traditional means. Trefis highlights the historical trends in Textron’s revenues across key operating segments in an interactive dashboard analysis.

How did Textron perform in 2021?

In 2021, Textron reported a 6% (y-o-y) growth in total revenues largely propelled by the Aviation segment. The company’s four operating segments, Aviation, Bell, Systems, and Industrial account for 37%, 27%, 10%, and 26% of the total revenues, respectively. Tepid travel demand and supply chain issues led to order cancellations in 2020. However, the resurgence of new infectious waves pushed the demand for private jets as most countries restricted air travel to contain the Covid-19 spread. Notably, the Aviation segment’s order backlog declined from $1.7 billion in 2019 to $1.6 billion in 2020 and subsequently surged to $4.2 billion in 2021. However, the tides seem to be turning again as the WHO mulls key parameters to declare an end of the public health emergency it declared in January 2020. Moreover, Russia’s invasion of Ukraine looms over broader markets – spooking investors with sky-high fuel prices and inflation. (related: Can This Aerospace Stock Provide Higher Returns Than Textron?)

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Stock Price Trend During The Pandemic

TXT stock declined from levels of around $47 in February 2020 (pre-crisis peak) to levels of around $21 in March 2020 (as the markets bottomed out), implying TXT stock lost 54% from its approximate pre-crisis peak. It observed a strong rally post the broader market sell-off to levels of $70 at present – rising by 219% over this period. In comparison, the S&P 500 Index first fell 34% as lockdowns were imposed in many countries and currently almost doubled in value.

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 Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 TXT Return -5% -10% 42%
 S&P 500 Return -4% -12% 88%
 Trefis MS Portfolio Return -4% -14% 238%

[1] Month-to-date and year-to-date as of 3/14/2022
[2] Cumulative total returns since the end of 2016

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