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Textron (TXT) Q1 Earnings: Disappointment in the Cards?
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Multi-industry conglomerate Textron Inc. (TXT - Free Report) is set to report first-quarter 2017 financial results on Apr 19, before the market opens.
Last quarter, the company posted a negative earnings surprise of 8.05%. Nevertheless, the company surpassed the Zacks Consensus Estimate in two of the past four quarters, with an average beat of 0.12%.
Let’s see how things are shaping up at the company prior to this announcement.
Factors at Play
In addition to manufacturing aircraft, automotive engine components and industrial tools as well as offering associated services, Textron operates as a commercial finance corporation in select markets. Its well-known brands include Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee.
Apart from significantly expanding its product and service portfolio, the company continues with its systematic inorganic growth initiatives. Toward this end, during its fourth-quarter earnings call, Textron announced plans to buy Arctic Cat, a leader in the recreational vehicle industry, for $247 million. In the yet-to-be reported quarter, the company completed the acquisition, which is expected to contribute to its Industrial segment significantly.
This buyout is expected to expand Textron’s product portfolio as well as boost its footprint in the outdoor recreational and utility vehicle market, courtesy of Arctic Cat’s established dealer network.
With respect to its commercial business, the company expects to witness stabilized market conditions on account of improved order flow. In this space, Textron’s new 505 Jet Ranger X achieved type certification from Transport Canada Civil Aviation at the end of 2016, while the follow-on FAA certification is expected in the first quarter of 2017. The company expects solid deliveries of this copter in the first quarter.
At the Systems segment, Textron witnessed improved revenue growth on higher volumes in the fourth quarter. We expect this segment to show similar revenue growth in the first quarter as well, driven by increased Tactical Armored Patrol Vehicle (TAPV) deliveries.
Also, Textron’s new V-280 Valor program continued to progress and is on course for the first flight this year. Going forward, maintaining a flow of new product offerings will ensure competitiveness and order growth.
In particular, management is optimistic about its foreign military sales contracts, thereby expecting to secure additional deals in 2017.
However, the company’s performance in several of its end markets remained subdued in the past couple of quarters with no significant improvement expected in the near term. Moreover, the company is likely to incur $50 million of expenses in 2017, thanks to its recently adopted Scorpion program. Textron is expected to bear a part of the expenses in the first quarter itself.
Lower sensor fuzed weapons (SFW) activities are expected to partially hamper revenue growth at the Systems segment. We also prefer to remain on the sidelines owing to global political uncertainty along with intensifying competition. The company’s growth by acquisition plans also run integration risks.
For the first quarter, the Zacks Consensus Estimate for earnings is pegged at 46 cents, down 16.14% year over year, while the consensus for revenues is at $3.17 billion, implying a 0.93% 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 of -2.17%. This is because the Most Accurate estimate is pegged at 45 cents, lower than the Zacks Consensus Estimate of 46 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 negative ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
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 first-quarter 2017 results on May 4. The company has an Earnings ESP of +2.21% and a Zacks Rank #1.
Raytheon Company is expected to report first-quarter 2017 results on Apr 27. The company has an Earnings ESP of +0.63% and a Zacks Rank #3.
Sell These Stocks. Now.
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500.
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Textron (TXT) Q1 Earnings: Disappointment in the Cards?
Multi-industry conglomerate Textron Inc. (TXT - Free Report) is set to report first-quarter 2017 financial results on Apr 19, before the market opens.
Last quarter, the company posted a negative earnings surprise of 8.05%. Nevertheless, the company surpassed the Zacks Consensus Estimate in two of the past four quarters, with an average beat of 0.12%.
Let’s see how things are shaping up at the company prior to this announcement.
Factors at Play
In addition to manufacturing aircraft, automotive engine components and industrial tools as well as offering associated services, Textron operates as a commercial finance corporation in select markets. Its well-known brands include Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, E-Z-GO and Greenlee.
Apart from significantly expanding its product and service portfolio, the company continues with its systematic inorganic growth initiatives. Toward this end, during its fourth-quarter earnings call, Textron announced plans to buy Arctic Cat, a leader in the recreational vehicle industry, for $247 million. In the yet-to-be reported quarter, the company completed the acquisition, which is expected to contribute to its Industrial segment significantly.
This buyout is expected to expand Textron’s product portfolio as well as boost its footprint in the outdoor recreational and utility vehicle market, courtesy of Arctic Cat’s established dealer network.
With respect to its commercial business, the company expects to witness stabilized market conditions on account of improved order flow. In this space, Textron’s new 505 Jet Ranger X achieved type certification from Transport Canada Civil Aviation at the end of 2016, while the follow-on FAA certification is expected in the first quarter of 2017. The company expects solid deliveries of this copter in the first quarter.
At the Systems segment, Textron witnessed improved revenue growth on higher volumes in the fourth quarter. We expect this segment to show similar revenue growth in the first quarter as well, driven by increased Tactical Armored Patrol Vehicle (TAPV) deliveries.
Also, Textron’s new V-280 Valor program continued to progress and is on course for the first flight this year. Going forward, maintaining a flow of new product offerings will ensure competitiveness and order growth.
In particular, management is optimistic about its foreign military sales contracts, thereby expecting to secure additional deals in 2017.
However, the company’s performance in several of its end markets remained subdued in the past couple of quarters with no significant improvement expected in the near term. Moreover, the company is likely to incur $50 million of expenses in 2017, thanks to its recently adopted Scorpion program. Textron is expected to bear a part of the expenses in the first quarter itself.
Lower sensor fuzed weapons (SFW) activities are expected to partially hamper revenue growth at the Systems segment. We also prefer to remain on the sidelines owing to global political uncertainty along with intensifying competition. The company’s growth by acquisition plans also run integration risks.
For the first quarter, the Zacks Consensus Estimate for earnings is pegged at 46 cents, down 16.14% year over year, while the consensus for revenues is at $3.17 billion, implying a 0.93% 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 of -2.17%. This is because the Most Accurate estimate is pegged at 45 cents, lower than the Zacks Consensus Estimate of 46 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 negative ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) 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
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 first-quarter 2017 results on May 4. The company has an Earnings ESP of +2.21% and a Zacks Rank #1.
Leidos Holdings, Inc. (LDOS - Free Report) is expected to report first-quarter 2017 results on May 4. The company has an Earnings ESP of +1.28% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.
Raytheon Company is expected to report first-quarter 2017 results on Apr 27. The company has an Earnings ESP of +0.63% and a Zacks Rank #3.
Sell These Stocks. Now.
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500.
See today's Zacks ""Strong Sells"" absolutely free >>.