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Textron (TXT) Down 11.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Textron (TXT - Free Report) . Shares have lost about 11.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Textron due for a breakout? 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 drivers.

Textron's Q2 Earnings Top, Revenues Miss, ’19 View Up

Textron reported second-quarter 2019 earnings from continuing operations of 93 cents per share, which surpassed the Zacks Consensus Estimate of 85 cents by 9.4%. The bottom line also increased 6.9% from 87 cents in the year-ago quarter.

This year-over-year improvement in earnings can be attributed to lower number of outstanding shares of the company in the quarter under review.

Revenues

Total revenues came in at $3,227 million, which fell short of the Zacks Consensus Estimate of $3,359 million by 3.9%. The reported figure also declined 13.4% from the year-ago figure of $3,726 million on lower contribution from all of the company’s segments.

Manufacturing revenues decreased 13.4% to $3,211 million, while revenues at the Finance division increased 5.9% to $16 million.

Segmental Performance

Textron Aviation: In the quarter under review, revenues at this segment declined 12% to $1,123 million from $1,276 million in the year-ago quarter. The top-line deterioration can be attributed to lower volume and mix across the commercial turboprop and defense product lines.

The company delivered 46 jets, down from 48 last year, and 34 commercial turboprops, down from 47 in 2018’s second quarter.

The segment registered profits of $105 million in the second quarter, slightly up from $104 million registered in the year-ago quarter owing to favorable performance. The order backlog at the end of the quarter was $1.9 billion, down from the prior quarter’s $2 billion.

Bell: Revenues from this segment summed $771 million, down 7% from the year-ago level of $752 million. Lower military volume led to the downside.

Segment profits were down by 12% to $103 million. Bell’s order backlog at the end of the quarter was $6 billion, down $0.3 billion from the preceding quarter number.

Textron Systems: Revenues at this segment came in at $308 million, down from $380 million a year ago. The downside can be attributed to lower volume at TRU Simulation and Training as well as Unmanned Systems.

Segmental profits increased to $49 million from $40 million on favorable performance that included a gain related to the formation of the company’s new training business in partnership with FlightSafety International Inc.

Textron Systems’ backlog at the end of the second quarter summed $1.4 billion, in line with the figure at the end of the first quarter of 2019.

Industrial: Revenues at this segment fell 17.4% to $1,009 million mainly on account of the divestiture of the company’s Tools & Test product line as well as lower volume.

Moreover, segmental profits decreased by $4 million.

Finance: Revenues at this segment decreased to $16 million from $17 million in the year-ago quarter. Segmental profits, however, increased by $1 million.

Financials

As of Jun 30, 2019, cash and cash equivalents totaled $775 million compared with $987 million as of Dec 29, 2018.

Cash outflow from operating activities amounted to $33 million at the end of the second quarter of 2019 compared to cash inflow of $415 million at the end of the prior-year period.

Capital expenditures were $76 million in the second quarter compared with $82 million in the prior-year period.

Long-term debt was $2,910 million as of Jun 30, 2019, compared with $2,808 million as of Dec 29, 2018.

Guidance

Textron raised its guidance for 2019. The company currently expects full-year earnings from continuing operations in the range of $3.65-$3.85 per share compared with $3.55-$3.75 anticipated earlier.

The Zacks Consensus Estimate for the company’s current-year earnings is $3.70, which lies below the midpoint of the company’s guided range.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -6.09% due to these changes.

VGM Scores

At this time, Textron has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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

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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