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Is a Surprise in Store for Textron (TXT) in Q4 Earnings?
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Textron Inc. (TXT - Free Report) is set to report fourth-quarter and full-year 2016 results on Jan 25, before the market opens.
Last quarter, the company posted an earnings surprise of 0.00%. Moreover, the company surpassed the Zacks Consensus Estimate in two of the past four quarters, with an average beat of 1.53%.
Let’s see how things are shaping up at the company prior to this announcement.
Factors at Play
Textron is a multi-industry conglomerate that is well-known for its brands such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee. Apart from manufacturing aircraft, automotive engine components and industrial tools as well as offering associated services, the company operates as a commercial finance corporation in select markets.
For full-year 2016, the company raised its earnings guidance to the range of $2.65–$2.85 from the prior projection of $2.60–$2.80. For the fourth quarter, management expects to receive initial certification for its new 505 Jet Ranger X light helicopter following which it will start the delivery of the same.
With respect to its Systems segment, wherein Textron witnessed lower revenues in the third quarter, the company has been adopting various initiatives to reduce cost. We expect the company to have benefited from these plans in the yet-to-be-reported quarter.
Moreover, Textron started the initial deliveries of Tactical Armored Patrol Vehicle (TAPV) to its Canadian customers in the third quarter and expects to witness substantial deliveries of the same in the fourth quarter. However, the deliveries are estimated to be slower than what management had originally expected.
In its commercial business, Textron recently introduced a new line of Cushman Hauler utility vehicles, which along with its well-established consumer product line, is expected to drive profits in the fourth quarter and beyond.
With respect to its restructuring plan, Textron has announced additional headcount reduction across its businesses, principally through a voluntary separation plan in its aviation segment. The outcome of these initiatives will get reflected in the company’s full-year 2016 results.
Moreover, Textron expects to incur pre-tax charges in the range of $140–$170 million in the fourth quarter, to reflect the cost reduction.
However, the company’s performance in several of its end markets remained challenging in the third quarter and no improvement is expected in the near term.
However, given the higher investments in restructuring and slower TAPV deliveries, the company revised its outlook for cash flow from continuing operations of the manufacturing group for pension contributions to $500–$600 million, down from its previous estimate of $600–$700 million.
For the fourth quarter, the Zacks Consensus Estimate for earnings stands at 87 cents a share, up 7.72% year over year, while the consensus for revenues is pegged at $3.90 billion, implying a 0.60% year-over-year decline.
Earnings Whispers
Our proven model does not conclusively show that Textron is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.
Zacks ESP: Textron has an Earnings ESP 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 87 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Textron carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Textron gained about 27% in the last three months, comparing favorably with the Zacks categorized Aerospace-Defense industry’s gain of 14.1%. This is probably due to the company’s declining backlog, overdependence on the F-35 program as well as intensifying competition.
Stocks that Warrant a Look
Here are a few stocks in the Aerospace and Defense space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:
Northrop Grumman Corporation (NOC - Free Report) is expected to report fourth-quarter 2016 results on Jan 26. The company has an Earnings ESP of +0.80% and a Zacks Rank #2.
L3 Technologies, Inc. is scheduled to report fourth-quarter 2016 results on Jan 26. The company has an Earnings ESP of +2.36% and a Zacks Rank #3.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research.See these stocks free >>
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Is a Surprise in Store for Textron (TXT) in Q4 Earnings?
Textron Inc. (TXT - Free Report) is set to report fourth-quarter and full-year 2016 results on Jan 25, before the market opens.
Last quarter, the company posted an earnings surprise of 0.00%. Moreover, the company surpassed the Zacks Consensus Estimate in two of the past four quarters, with an average beat of 1.53%.
Let’s see how things are shaping up at the company prior to this announcement.
Factors at Play
Textron is a multi-industry conglomerate that is well-known for its brands such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee. Apart from manufacturing aircraft, automotive engine components and industrial tools as well as offering associated services, the company operates as a commercial finance corporation in select markets.
For full-year 2016, the company raised its earnings guidance to the range of $2.65–$2.85 from the prior projection of $2.60–$2.80. For the fourth quarter, management expects to receive initial certification for its new 505 Jet Ranger X light helicopter following which it will start the delivery of the same.
With respect to its Systems segment, wherein Textron witnessed lower revenues in the third quarter, the company has been adopting various initiatives to reduce cost. We expect the company to have benefited from these plans in the yet-to-be-reported quarter.
Moreover, Textron started the initial deliveries of Tactical Armored Patrol Vehicle (TAPV) to its Canadian customers in the third quarter and expects to witness substantial deliveries of the same in the fourth quarter. However, the deliveries are estimated to be slower than what management had originally expected.
In its commercial business, Textron recently introduced a new line of Cushman Hauler utility vehicles, which along with its well-established consumer product line, is expected to drive profits in the fourth quarter and beyond.
With respect to its restructuring plan, Textron has announced additional headcount reduction across its businesses, principally through a voluntary separation plan in its aviation segment. The outcome of these initiatives will get reflected in the company’s full-year 2016 results.
Moreover, Textron expects to incur pre-tax charges in the range of $140–$170 million in the fourth quarter, to reflect the cost reduction.
However, the company’s performance in several of its end markets remained challenging in the third quarter and no improvement is expected in the near term.
However, given the higher investments in restructuring and slower TAPV deliveries, the company revised its outlook for cash flow from continuing operations of the manufacturing group for pension contributions to $500–$600 million, down from its previous estimate of $600–$700 million.
For the fourth quarter, the Zacks Consensus Estimate for earnings stands at 87 cents a share, up 7.72% year over year, while the consensus for revenues is pegged at $3.90 billion, implying a 0.60% year-over-year decline.
Earnings Whispers
Our proven model does not conclusively show that Textron is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.
Zacks ESP: Textron has an Earnings ESP 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 87 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Textron carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Textron Inc. Price and EPS Surprise
Textron Inc. Price and EPS Surprise | Textron Inc. Quote
Price Movement
Textron gained about 27% in the last three months, comparing favorably with the Zacks categorized Aerospace-Defense industry’s gain of 14.1%. This is probably due to the company’s declining backlog, overdependence on the F-35 program as well as intensifying competition.
Stocks that Warrant a Look
Here are a few stocks in the Aerospace and Defense space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:
Huntington Ingalls Industries, Inc. (HII - Free Report) is expected to report fourth-quarter 2016 results on Feb 16. The company has an Earnings ESP of +2.82% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Northrop Grumman Corporation (NOC - Free Report) is expected to report fourth-quarter 2016 results on Jan 26. The company has an Earnings ESP of +0.80% and a Zacks Rank #2.
L3 Technologies, Inc. is scheduled to report fourth-quarter 2016 results on Jan 26. The company has an Earnings ESP of +2.36% and a Zacks Rank #3.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research.See these stocks free >>