Will Textron Stock See Higher Levels Post Q4 Results?

TXT: Textron logo

Textron stock (NYSE: TXT) is scheduled to report its Q4 2022 results on Thursday, January 26. We expect TXT stock to trade sideways post-Q4, with its revenue expected to be in line and earnings above the street estimates. The company will likely continue to benefit from higher aircraft and aftermarket volume. Not only do we expect the company to navigate well over the latest quarter, but our forecast indicates that TXT stock has more room for growth, as discussed below. Our interactive dashboard analysis of Textron Earnings Preview has additional details.

(1) Revenues expected to be in line with the consensus estimates

  • Trefis estimates Textron’s Q4 2022 revenues to be around $3.3 billion, reflecting a low single-digit y-o-y decline and aligning with the $3.3 billion consensus estimate.
  • With the rising travel demand, Textron should benefit from increased aircraft and aftermarket volume.
  • Its Industrial business should continue to benefit from better price realization and volume gains.
  • However, the Bell segment may continue to see sales decline due to lower military revenues for its H-1 program. The segment revenue was down 9% for the nine months ending Sep 2022. Textron Systems segment may also see a decline in sales due to lower volume.
  • Looking at Q3 2022, the company saw its sales rise 3% y-o-y to $3.1 billion, driven by higher sales for its Industrial segment.
  • Our dashboard on Textron Revenues has more details on the company’s segments.
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(2) EPS likely to be above the consensus estimates

  • Textron’s Q4 2022 adjusted earnings per share (EPS) is expected to be $1.07 per Trefis analysis, comfortably above the consensus estimate of $1.00. This compares with the $0.86 figure the company reported in the prior-year quarter.
  • The company’s net income of $225 million in Q3 2022 reflected a 22% rise from its $185 million figure in the prior-year quarter, led by a 38 bps rise in operating margin.
  • For the full-year 2023, we expect the EPS to be higher at $5.11 compared to the EPS of $3.33 in 2021 and an estimated $4.83 in 2022.

(3) TXT stock looks like it has more room for growth

  • We estimate Textron’s Valuation to be around $81 per share, which is 17% above the current market price of $69.
  • At its current levels, TXT stock is trading at a 13x forward EPS estimate of $5.11, compared to the last three-year average of 18x, implying that it has more room for growth.
  • Furthermore, if the company reports upbeat Q4 results and provides a 2023 outlook better than the street estimates, the P/E multiple will likely be revised upward, resulting in even higher levels for TXT stock.

While TXT stock looks like it has more room for growth, it is helpful to see how Textron’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Aerojet Rocketdyne vs. Brink’s Company.

Given higher inflation and the Fed raising interest rates, among other factors, TXT stock has seen a 1% fall in the last twelve months. Can it drop more? See how low Textron stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Jan 2023
MTD [1]
YTD [1]
Total [2]
 TXT Return -2% -2% 42%
 S&P 500 Return 4% 4% 79%
 Trefis Multi-Strategy Portfolio 9% 9% 242%

[1] Month-to-date and year-to-date as of 1/24/2023
[2] Cumulative total returns since the end of 2016

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