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Diversified U.S. conglomerate, Textron Inc. (TXT - Analyst Report) announced strong second quarter 2012 earnings of 58 cents per share versus 29 cents per share in the year-ago quarter. The quarterly result also comfortably surpassed the Zacks Consensus Estimate of 44 cents. Higher numbers for the company were due to strong performance at Bell, continued improvement at Cessna, complemented by good performance in the Industrial business.

Operating Statistics

Textron clocked quarterly revenue of $3.02 billion clearing both the Zacks Consensus Estimate of $2.97 billion and year-ago quarterly revenue of $2.73 billion. The year-over-year quarterly upward spike in revenue of 10.7% is attributable to higher performance from all of its manufacturing business segments, barring Textron Systems. The performance of the Finance division was also higher than the year-ago quarter.

Segmental Revenue

Cessna: The revenue from this division during the reported quarter increased $111 million year over year to approximately $763 million. In the reported quarter the company delivered 49 new Citation jets, compared with 38 in the year ago quarter. Segment profit increased $30 million to $35 million, primarily due to higher volume. Cessna backlog at the end of the second quarter was $1.5 billion, down $196 million from the first quarter of 2012

Bell: The revenue from this division during the reported quarter increased $184 million to $1.06 billion. The upside came primarily from the delivery of 47 commercial helicopters compared with 22 units in last year’s second quarter. Bell also delivered 9 V-22 and 6 H-1 aircraft in the quarter compared with 9 V-22’s and 8 H-1’s in last year’s second quarter. Segment profit increased $32 million to $152 million, primarily reflecting higher volume and favorable mix in our commercial business. Bell backlog at the end of the second quarter was $6.7 billion, down $394 million from the first quarter of 2012.

Textron Systems: The revenue from this division during the reported quarter decreased $63 million to $389 million. Segment profit decreased $9 million to $40 million, reflecting lower volumes and higher deliveries on lower-margin contracts. Textron Systems’ backlog at the end of the second quarter was $2.7 billion, up $1.2 billion from the first quarter of 2012.

Industrial: The revenue from this division increased $37 million during the quarter to $756 million from $719 million in the year-ago quarter. Revenue benefited from higher volumes partially offset by unfavorable foreign exchange. This resulted in segmental profit rising by $6 million to $61 million, primarily due to the higher volume.

Finance: The revenue from this division increased $22 million to $55 million. The segment reported a profit of $22 million compared to a $33 million loss in last year’s second quarter.

Financial Condition

Cash and cash equivalents of the company, as of June 30, 2012, were $898 million versus $871 million as of December 31, 2011. Capital expenditure during the quarter was $85 million versus $91 million in the year-ago quarter. Long-term debts of the company as of June 30, 2012 were $1.81 billion, reflecting a decline of $504 million from year-end 2011 level.

Guidance

Textron reaffirmed its 2012 earnings per share from continuing operations guidance in a band of $1.80 to $2.00 per share. The company also reaffirmed its manufacturing free cash flow before pension contribution forecast for 2012 in a range of $700 million to $750 million. The company anticipates planned pension contributions of about $200 million.

Our Take  

Based in Providence, the Rhode Island, Textron Inc. is a global multi-industry company that manufactures aircraft, automotive engine components, and industrial tools. The company continues to enjoy a strong backlog at its business divisions. Textron was able to secure a few important contracts during the quarter. The most noticeable among them were the Canadian Tactical Armored Patrol Vehicle, the U.S. Navy’s Ship-to–Shore Connector, upgrades to the U.S. Army’s Shadow TUAS, and an agreement with Berkshire Hathaway Inc. (BRK.A - Snapshot Report) to provide up to 150 Citation Latitudes for their fleet.

Textron currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock. This is in line with its peers like Tyco International Ltd. (TYC - Analyst Report) and United Technologies Corporation (UTX - Analyst Report).

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