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Will Bell Unit Remain an Overhang on Textron (TXT) Q4 Earnings?
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Textron Inc. (TXT - Free Report) is scheduled to report fourth-quarter 2020 results on Jan 27, before market open. The company surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average earnings surprise being 54.24%.
Textron’s Bell segment’s dismal performance is likely to hurt soon-to-be-reported quarter’s results.
Let’s see how things are shaping up prior to this announcement.
Poor Bell Segment Projections
The Bell segment witnessed dismal performance of its commercial business in the last couple of quarters due to delivery delays stemming from coronavirus-induced travel restrictions. However, the segment has been witnessing solid military volumes due to higher aftermarket volume on existing contracts in support of the V-22 and H-1 fleets. We expect the upcoming results to duly reflect these trends.
The Zacks Consensus Estimate for the segment’s fourth-quarter revenues stands at $905 million, indicating 5.8% decline from the year-ago quarter’s reported figure.
At the onset of the fourth quarter, Textron’s Bell segment expanded its footprint in Germany by adding Intercopter GmbH to its Authorized Maintenance Center (AMC) network. This is likely to have enabled Bell to offer better service for maintaining rotary and fixed wing aircraft. This is expected to get reflected in the company’s upcoming results.
Other Factors at Play
Apart from the company’s Bell segment, delivery figures of the other segments remained quite poor during the fourth quarter. Apart from the delivery of three preowned Cessna Citation Sovereign+ business jets, the first Beechcraft King Air 360 turboprop aircraft and two Special mission Beechcraft King Air 350CER jets, there were no other notable delivery news. Notably, such dismal figures are likely to have negatively impacted overall revenues in the fourth quarter.
The Zacks Consensus Estimate for fourth-quarter sales stands at $3.47 billion, suggesting a decline of 14% from the figure reported in the prior-year quarter.
On the cost front, the company has been incurring pre-tax charges lately related to its restructuring plan, announced in the second quarter. However, at the end of the third quarter, Textron entered into a closing agreement with a State Tax Authority for recognition of tax benefits to reduce its tax expense in the fourth quarter by approximately $40-$50 million. This is likely to have positively impacted the company’s bottom-line performance.
Nevertheless, significant idle facility costs that the company has been incurring due to storage of finished products as well as employee furloughs, resulting from the pandemic, might have had an adverse impact on its overall earnings figure.
Currently, the Zacks Consensus Estimate for fourth-quarter earnings, pegged at 90 cents per share, suggests a 18.9% fall from the year-ago quarter’s reported figure.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Textron this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.
Textron has an Earnings ESP of -4.24% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Upcoming Releases
Here are some defense companies you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases:
Curtiss-Wright (CW - Free Report) has an Earnings ESP of +1.50% and a Zacks Rank of 3.
Teledyne Technologies (TDY - Free Report) has an Earnings ESP of +5.86% and a Zacks Rank of 3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Bigstock
Will Bell Unit Remain an Overhang on Textron (TXT) Q4 Earnings?
Textron Inc. (TXT - Free Report) is scheduled to report fourth-quarter 2020 results on Jan 27, before market open. The company surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average earnings surprise being 54.24%.
Textron’s Bell segment’s dismal performance is likely to hurt soon-to-be-reported quarter’s results.
Let’s see how things are shaping up prior to this announcement.
Poor Bell Segment Projections
The Bell segment witnessed dismal performance of its commercial business in the last couple of quarters due to delivery delays stemming from coronavirus-induced travel restrictions. However, the segment has been witnessing solid military volumes due to higher aftermarket volume on existing contracts in support of the V-22 and H-1 fleets. We expect the upcoming results to duly reflect these trends.
The Zacks Consensus Estimate for the segment’s fourth-quarter revenues stands at $905 million, indicating 5.8% decline from the year-ago quarter’s reported figure.
Textron Inc. Price and EPS Surprise
Textron Inc. price-eps-surprise | Textron Inc. Quote
At the onset of the fourth quarter, Textron’s Bell segment expanded its footprint in Germany by adding Intercopter GmbH to its Authorized Maintenance Center (AMC) network. This is likely to have enabled Bell to offer better service for maintaining rotary and fixed wing aircraft. This is expected to get reflected in the company’s upcoming results.
Other Factors at Play
Apart from the company’s Bell segment, delivery figures of the other segments remained quite poor during the fourth quarter. Apart from the delivery of three preowned Cessna Citation Sovereign+ business jets, the first Beechcraft King Air 360 turboprop aircraft and two Special mission Beechcraft King Air 350CER jets, there were no other notable delivery news. Notably, such dismal figures are likely to have negatively impacted overall revenues in the fourth quarter.
The Zacks Consensus Estimate for fourth-quarter sales stands at $3.47 billion, suggesting a decline of 14% from the figure reported in the prior-year quarter.
On the cost front, the company has been incurring pre-tax charges lately related to its restructuring plan, announced in the second quarter. However, at the end of the third quarter, Textron entered into a closing agreement with a State Tax Authority for recognition of tax benefits to reduce its tax expense in the fourth quarter by approximately $40-$50 million. This is likely to have positively impacted the company’s bottom-line performance.
Nevertheless, significant idle facility costs that the company has been incurring due to storage of finished products as well as employee furloughs, resulting from the pandemic, might have had an adverse impact on its overall earnings figure.
Currently, the Zacks Consensus Estimate for fourth-quarter earnings, pegged at 90 cents per share, suggests a 18.9% fall from the year-ago quarter’s reported figure.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Textron this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.
Textron has an Earnings ESP of -4.24% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Upcoming Releases
Here are some defense companies you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases:
Leidos Holdings (LDOS - Free Report) has an Earnings ESP of +6.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Curtiss-Wright (CW - Free Report) has an Earnings ESP of +1.50% and a Zacks Rank of 3.
Teledyne Technologies (TDY - Free Report) has an Earnings ESP of +5.86% and a Zacks Rank of 3.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>