Textron Beats Estimates, Sales Dip

Textron Inc (TXT - Snapshot Report) has flown past the Zacks Consensus Estimate of a loss of 2 cents per share to register earning per share (EPS) of 12 cents in the third quarter of fiscal 2009. However, it fell far short of the year-ago figure of 85 cents per diluted share. The company also digested a $42 million charge in the quarter (10 cents per share) for its ongoing restructuring program.

Revenues cascaded 27% to $2.5 billion in the reported quarter from $3.5 billion in the year-ago quarter. The Cessna segment’s revenues decreased $593 million year-over-year to $825 million, primarily reflecting lower delivery of Citation jets (68 jets compared to 124 in the year-ago quarter). Bell’s revenues decreased $74 million year-over-year to $628 million on account of lower commercial helicopter revenues.

Revenues for the Industrial segment decreased $203 million to $523 million compared to year-ago quarter due to lower volumes. Finance segment revenues also decreased $113 million to $71 million in the reported quarter. The only redeeming factor was Textron Systems, where revenue increased $61 million year-over-year to $502 million primarily due to the higher volume of Unmanned Aircraft Systems (UAS).

The bottom line, however, presented a different picture where both Bell and Textron Systems witnessed a marginal rise to their operating profits. However, Industrial Systems remained stagnant with an operating profit of $6 million in both the reported and year-ago quarter.

The downside came from Cessna where operating profit decreased $206 million year-over-year to $32 million. This was primarily due to the lower sales volumes and related costs associated with idle capacity and temporary plant shutdowns. Also, the Finance segment registered an operating loss of $64 million for the quarter due to higher portfolio losses, lower other income and securitization gains and the impact of lower average finance receivables.

Textron reported $547 million cash from operating activities in the quarter, compared to $259 million in the year-ago quarter. Cash and cash equivalents at the end of the quarter was $2 billion, while long-term debt stood at $3.6 billion.

Textron expects its fiscal 2009 EPS to be in the upper end of its guidance range of 33-63 cents on expected revenues of about $10.6 billion. The company also reaffirmed its fiscal 2009 free cash flow to be in the range of $300-$400 million. We maintain our market Neutral recommendation on the shares.

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