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Will Margin Growth Boost Textron's (TXT) Earnings in Q1?

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Textron Inc. (TXT - Free Report) is scheduled to report first-quarter 2021 results on Apr 29, before market open.

In the last reported quarter, the company delivered an earnings surprise of 16.48%. Moreover, it surpassed the Zacks Consensus Estimate in three of the trailing four quarters while missing in one, the average earnings surprise being 57.67%.

Poor Bell Segment Projections

The Bell segment has been witnessing dismal commercial volumes over the past few quarters due to low deliveries and delivery delays stemming from coronavirus-induced travel restrictions. During the first quarter of 2021, Textron’s Bell segment only delivered its first European Union Aviation Safety Agency (EASA)-certified Bell 505 NXi to a corporate customer in Europe. Such low delivery figures are likely to have affected the Bell segment’s quarterly performance.

The Zacks Consensus Estimate for the segment’s first-quarter revenues stands at $738 million, indicating a 10.3% decline from the year-ago quarter’s tally.

Other Factors at Play

Along with the Bell segment, delivery figures reported by the other segments remained fairly poor during the first quarter. Apart from the delivery of a Beechcraft King Air 350i aircraft by Textron Aviation to the Japan Ground Self Defense Force, no other significant deliveries were made. Notably, such dismal figures are likely to have negatively impacted overall revenues in the first quarter.

The Zacks Consensus Estimate for first-quarter sales stands at $2.74 billion, suggesting a decline of 1.3% from the figure reported in the prior-year quarter.

Interestingly, on the margin front, Textron is expected to have delivered solid margin performance at the Bell segment, while continuing to invest in Future Vertical Lift. In the Industrial segment, the company is projected to have witnessed margin improvement at Kautex as auto demand continues to recover from pre-COVID levels. At Textron Specialized Vehicles also, the company is expected to have witnessed a margin improvement as it continues to grow its powersports business with Bass Pro Shops.

Such solid margin improvement expectations are likely to have boosted the company’s overall bottom-line performance in the soon-to-be-reported quarter.

In line with this, the Zacks Consensus Estimate for first-quarter earnings, pegged at 47 cents per share, suggests 34.3% growth 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 time around. 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 this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Textron has an Earnings ESP of -23.73% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Textron Inc. Price and EPS Surprise

Stocks to Consider

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:

The Boeing Company (BA - Free Report) has an Earnings ESP of +5.55% and a Zacks Rank #3.

Heico Corporation (HEI - Free Report) has an Earnings ESP of +4.94% and a Zacks Rank #3.

Triumph Group, Inc. (TGI - Free Report) has an Earnings ESP of +9.80% and a Zacks Rank #3.

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