Earnings Preview: Textron Inc.

Diversified U.S. conglomerate, Textron Inc. ( TXT - Analyst Report ) is slated to report its fourth quarter 2011 financial results before markets open on January 25. The current Zacks Consensus Estimate for the quarter is 36 cents a share. The Zacks Consensus estimates revenue at $3,286 million.

Third-Quarter 2011, a Synopsis

Backed by a rejuvenated business jet market leading to higher volumes, Textron announced third quarter 2011 adjusted earnings of 45 cents per share, handsomely beating the Zacks Consensus Estimate of 31 cents. The quarterly result also exceeded year-ago earnings of 13 cents.

Textron clocked quarterly revenues of approximately $2.8 billion which came in line with the Zacks Consensus Estimate. Revenues also beat the year-ago figure of $2.5 billion by 13.5%. The year-over-year rise in revenues was mainly attributable to a higher top line in the Cessna Division. The quarter witnessed higher revenues across the board barring the Finance segment.

Management Guided

Textron riding on bullish top-line growth prospects across its manufacturing segments now forecasts 2011 earnings per share from continuing operations in the range of $1.05 – $1.15.

Fourth-Quarter 2011 Zacks Consensus

The analysts, considered by Zacks, expect Textron to post fourth-quarter 2011 earnings of 36 cents a share. The current Zacks Consensus Estimate reflects an estimated growth of 8.48% from the prior-year quarter’s earnings. The current Zacks Consensus Estimates for the quarter range between 22 cents and 51 cents.

Zacks Agreement & Magnitude

Of the 10 analysts following the stock, only 1 analyst revised the estimate downward, while none of them revised the same upward in the last 30 days. As a result the Zacks Consensus Estimate shrunk by a penny in the last 30 days to 36 cents. In the last 7 days, none of the analysts revisited their estimates, thereby keeping the Zacks Consensus Estimate unchanged.

Mixed Earnings Surprise History

With respect to earnings surprises, Textron has missed as well as topped the Zacks Consensus Estimate over the last four quarters in the range of negative 41.18% to positive 45.16%. The average remained at positive 13.00%. This suggests that Textron has exceeded the Zacks Consensus Estimate by an average of 13.00% in the trailing four quarters.

Price Stats

Since its last earnings release on October 19, 2011, Textron’s market price increased 8.6% to $20.17 as of January 10, 2012. During trading hours on January 10, the stock reached the day low of $19.29 and the day high of $20.26. The stock price is within the range of the 52-week low-high range of $14.66 attained on August 26, 2011 and $28.87 achieved on February 18, 2011.

Textron Bullish On Commercial Aerospace

Based in Providence, Rhode Island, Textron Inc. is a global multi-industry company that manufactures aircraft, automotive engine components and industrial tools.

We believe Textron should do well in its commercial aerospace businesses with the gradual recovery in the economy. The improving fundamentals in the commercial aerospace industry should bode well for Textron’s Cessna jets and Bell Helicopter businesses going forward. Cessna’s fortunes will improve mainly through high demand for light cabin business jets. Also, in the near term, Bell’s growth will be guided by a judicious mix of military with commercial business through the V-22 Osprey and H-1 helicopters. Textron Systems will also see growth coming from government’s focus on UAVs (unmanned aerial vehicles) and ASVs (armored security vehicles).

Also, Textron’s geographically-diverse network of aircraft, defense & intelligence, industrial and finance businesses negates any specific business risk. The company is known around the world for its most recognizable and valuable brand names, such as Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, Lycoming, E-Z-GO and Greenlee. The company has a strong presence in diverse areas of business jets and other general aviation aircraft, helicopter, aircraft engines, golf carts, turf maintenance equipment, electronic test equipment and blow-molded fuel tanks.

Textron’s balance sheet remains stable with a long-term debt-to-capitalization of 60.4% at the end of the first nine months of 2011. The company also ended the quarter with cash holdings of $1.5 billion, which, along with its receivables liquidation expected to come through, would be enough to keep the liquidity profile of the company in good shape. Textron’s balance sheet remains stable with $3.9 billion of total debt, down $500 million from the end of the first half of 2011.

Textron currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. This is in sync with its diversified conglomerate peers like Honeywell International Inc. ( HON - Analyst Report ) andCarlisle Companies Incorporated ( CSL - Snapshot Report ) ).