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Textron (TXT) Up 2.6% Since Earnings Report: Can it Continue?

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It has been about a month since the last earnings report for Textron Inc. (TXT - Free Report) . Shares have added about 2.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is TXT due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Textron reported first-quarter 2018 earnings from continuing operations of 72 cents per share, which beat the Zacks Consensus Estimate of 46 cents by 56.5%. Earnings were up 94.6% from 37 cents in the year-ago quarter.

Revenues

Total revenues in the quarter were $3,296 million, which surpassed the Zacks Consensus Estimate of $3,114 million by 5.8%. Reported revenues also improved 6.6% from the year-ago figure of $3,093 million on higher contribution from Bell, Textron Aviation and Industrial segments.

Manufacturing revenues were up 6.7% to $3,280 million, while revenues at the Finance division declined 11.1% to $16 million.

Segment Performance

Textron Aviation: Revenues during the quarter rose 4.1% to $1,010 million from $970 million in the year-ago quarter due to higher price and volume.

The company delivered 36 jets, up from 35 last year, and 29 commercial turboprops, up from 20 the previous year.

The segment registered profits of $72 million in the first quarter, up from $36 million in the year-ago quarter due to favorable volume and mix, performance, and price. Order backlog at the end of the quarter under review was $1.6 billion, up by $400 million sequentially.

Bell: Segment revenues were $752 million, up 8% from the year-ago level of $697 million on higher military volumes, partially offset by lower commercial revenues.

Segment profits were up by $4 million to $87 million, primarily due to higher volumes. Bell’s order backlog at the end of the quarter was $3.6 billion, down by $1 billion from the preceding quarter.

Textron Systems: Revenues during the quarter came in at $387 million, down from $416 million a year ago, mainly because of lower volume at Weapons & Sensors related to the discontinuance of SFW production in 2017.

Segmental profits improved to $50 million from $20 million, due to improved performance at Marine and Land.

Textron Systems’ backlog at the end of the quarter was $1.4 billion, in line with that of the fourth quarter of 2017.

Industrial: Segmental revenues grew 14% to $1,010 million primarily driven by favorable foreign exchange, the Arctic Cat acquisition and higher volumes across each business line.

Segmental profits were down by $12 million, due to the timing of the Arctic Cat acquisition in the prior year.

Finance: Finance segment revenues declined by $2 million to $16 million while profits increased by $2 million.

Financials

As of Mar 31, 2018, cash and cash equivalents were $688 million compared with $1,079 million as of Dec 31, 2017.

Cash outflow from operating activities totaled $85 million at the end of first-quarter, compared with $191 million in the prior-year quarter.

Capital expenditure during the reported quarter was $77 million compared with $76 million as of Apr 1, 2017.

Long-term debt was $3,083 million as of Mar 31, 2018, up from $3,074 million as of Dec 31, 2017.

Guidance

Textron has reiterated its guidance for 2018. The company continues to expect earnings per share from continuing operations in the range of $2.95-$3.15.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to four lower.

Textron Inc. Price and Consensus

 

Textron Inc. Price and Consensus | Textron Inc. Quote

VGM Scores

At this time, TXT has an average Growth Score of C, a grade with the same score on the momentum front. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, TXT has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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