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Textron (TXT) Up 6.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Textron (TXT - Free Report) . Shares have added about 6.1% in that time frame, outperforming the S&P 500.

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

Textron’s Q4 Earnings Beat, Revenues Miss Estimates

Textron reported fourth-quarter 2018 adjusted earnings from continuing operations of $1.15 per share, which surpassed the Zacks Consensus Estimate of 98 cents by 17.3%. The bottom line also surged 55.4% from 74 cents registered in the year-ago quarter.

This year-over-year increase can be attributed to improved segment profit during the reported quarter.

Excluding one-time adjustments of 13 cents, the company reported GAAP earnings of $1.02 per share against loss of 40 cents incurred in fourth-quarter 2017.

For 2018, Textron’s adjusted earnings totaled $3.34 per share, up 36.3% from $2.45 registered in the prior year. The reported figure also surpassed the Zacks Consensus Estimate of $3.19 by 4.7%.

Revenues

Total revenues came in at $3,750 million, which fell short of the Zacks Consensus Estimate of $3,921 million by 4.4%. The reported figure also declined 6.6% from the year-ago figure of $4,017 million due to lower contribution from the Textron Systems, Bell and Industrial segments.

Manufacturing revenues decreased 6.7% to $3,732 million, while revenues at the Finance division rose 20% to $18 million.

For 2018, Textron generated revenues of $13.91 billion, down 1.6% from $14.13 billion registered in the prior year. The metric also missed the Zacks Consensus Estimate of $14.21 billion by 2.1%.

Segmental Performance

Textron Aviation: In the quarter under review, revenues at this segment improved 12% to $1,552 million from $1,391 million in the year-ago quarter. The improvement can be attributed to higher volume and mix across the jet and commercial turboprop product lines as well as favorable pricing.

The company delivered 63 jets, up from 58 last year, and 67 commercial turboprops, up from 45 in 2017.

In the quarter under review, the segment registered profits of $170, up from $120 million registered in the year-ago quarter owing to higher volumes and favorable price. Order backlog at the end of the fourth quarter was $1.8 billion, flat with the prior-quarter’s figure.

Bell: Revenues at this segment summed $827 million, down 16% from the year-ago level of $983 million. Lower military volume led to the downside.

Segment profits decreased by 5.3% to $108 million. Bell’s order backlog at the end of the quarter was $5.8 billion, up a mere $0.1 billion from the preceding quarter.

Textron Systems: Revenues at this segment came in at $345 million, down from $489 million a year ago. The downturn was mainly on account of lower TAPV deliveries at Textron Marine & Land Systems as well as lower Unmanned Systems volume.

Meanwhile, segmental profits remained flat at $37 million in the reported quarter, with lower volume and mix offset by favorable performance.

Textron Systems’ backlog at the end of the fourth quarter amounted to $1.5 billion, slightly higher than $1.1 billion in the third quarter of 2018.

Industrial: Revenues at this segment fell 11.5% to $1,008 million, primarily due to the divestiture of the company’s Tools & Test product line.

Moreover, segmental profits were down by $10 million on the divestment of the Tools & Test product line.

Finance: Revenues at this segment rose by $3 million to $18 million in the reported quarter. Segmental profits also improved by $3 million.

Financials

As of Dec 29, 2018, cash and cash equivalents totaled $987 million compared with $1,079 million as of Dec 31, 2017.

Cash flow from operating activities amounted to $1,109 million at the end of 2018 compared with $963 million at the end of 2017.

Capital expenditures were $369 million compared with $423 million in the prior year.

Long-term debt was $2,808 million as of Dec 29, 2018, compared with $3,074 million as of Dec 31, 2017.

Guidance

Textron issued its guidance for 2019. The company currently expects full-year earnings from continuing operations in the range of $3.55-$3.75 per share on revenues of $14 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Textron has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

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




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