Textron stock (NYSE: TXT) will report its Q1 2023 results on Thursday, April 27. We expect TXT stock to trade higher post-Q1, with its revenue and earnings expected to exceed 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 is undervalued, as discussed below. Our interactive dashboard analysis of Textron Earnings Preview has additional details.
(1) Revenues expected to be slightly above the consensus estimates
- Trefis estimates Textron’s Q1 2023 revenues to be around $2.85 billion, reflecting a mid-single-digit y-o-y decline and slightly above the $2.75 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. Textron Systems segment may also see a decline in sales due to lower volume.
- Looking at Q4 2022, the company saw its sales rise 9% y-o-y to $3.6 billion, driven by higher sales for its Aviation and Industrial segments.
- 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 Q1 2023 adjusted earnings per share (EPS) is expected to be $0.90 per Trefis analysis, slightly above the consensus estimate of $0.86. This compares with the $0.83 figure the company reported in the prior-year quarter.
- The company’s net income of $226 million in Q4 2022 reflected a 9% rise from its $207 million figure in the prior-year quarter, led by higher revenues.
- For the full-year 2023, we expect the EPS to be higher at $4.52 compared to the EPS of $4.01 in 2022.
(3) TXT stock looks undervalued
- We estimate Textron’s Valuation to be around $83 per share, about 24% above the current market price of $67.
- At its current levels, TXT stock is trading at a 15x the forward EPS estimate of $4.52, compared to the last five-year average of 18x, implying that it is currently undervalued.
- Furthermore, if the company reports upbeat Q1 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.
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 5% fall this year. 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.
|S&P 500 Return||-1%||6%||82%|
|Trefis Multi-Strategy Portfolio||-1%||6%||235%|
 Month-to-date and year-to-date as of 4/26/2023
 Cumulative total returns since the end of 2016