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Will Improved Deliveries Boost Textron's (TXT) Q2 Earnings?

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

Improved delivery figures along with a solid margin performance at majority of the company’s segments, courtesy of the gradually improving economy, are likely to have boosted its operating performance in the soon-to-be-reported quarter.

Bell Segment Projections

During the second quarter of 2021, Textron’s Bell segment made a handful of deliveries. Notably, the unit delivered a Bell 505 helicopter to BAR Aviation, which marked the first Bell 505 in Uganda and the first Bell 505 designed to complete medical evacuation (medevac) missions in Africa. It also delivered two Bell 407GXi helicopters to Shin-Nihon Helicopters in Japan during the quarter. Textron's Bell also announced the delivery of a Bell 505 to the Montenegro Air Force, making it the 60th Bell 505 aircraft in Europe.

However, 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. Although, the air traffic statistic has improved over the past few months to some extent, a complete reversal of the situation is unlikely. So, the Bell segment’s overall result might not reflect significantly improved figures for the commercial market.

The Zacks Consensus Estimate for the segment’s second-quarter revenues stands at $790 million, representing a 3.9% decline from the year-ago-quarter’s reported figure.

Other Factors at Play

Alongside the Bell segment, delivery figures reported by the company's other segments remained fairly high during the second quarter, after a dismal delivery show in the prior quarter. The Textron Aviation segment achieved a certification from the National Civil Aviation Authority of Brazil (ANAC) for its Beechcraft King Air 360/360ER and King Air 260, clearing the way for deliveries to begin in the second quarter itself. Textron Aviation also delivered its Cessna Citation XLS plus to a customer based in the Northeastern United States. These deliveries are likely to have positively impacted overall revenues in the second quarter.

The Zacks Consensus Estimate for first-quarter sales stands at $2.92 billion, suggesting growth of 18.2% from the figure reported in the prior-year quarter.

During the first-quarter earnings call, Textron anticipated to witness stronger margins on the Aviation and Systems side for the second quarter. Interestingly, on the margin front, Textron is expected to have delivered a 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 the retail demand in industrial-owned markets has been improving and auto demand continues to recover from pre-COVID levels.

At Textron Specialized Vehicles, the company is expected to have witnessed a margin improvement as it continues to grow its personal transportation vehicle and powersports businesses.

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 61 cents per share, suggests a massive 369.2% surge from the year-ago quarter’s reported figure.

Textron Inc. Price and EPS Surprise

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 -7.27% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are a few defense companies you may want to consider, as these have the right combination of elements to post an earnings beat this season:

Leidos Holdings (LDOS - Free Report) has an Earnings ESP of +4.46% and a Zacks Rank #2.

General Dynamics (GD - Free Report) has an Earnings ESP of +1.98% and a Zacks Rank #3.

Northrop Grumman (NOC - Free Report) has an Earnings ESP of +0.97% and a Zacks Rank #2.