A month has gone by since the last earnings report for Textron (TXT). Shares have added about 17.5% 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 Q1 Earnings Miss Estimates, Revenues Fall Y/Y
Textron reported first-quarter 2020 adjusted earnings of 35 cents per share, which missed the Zacks Consensus Estimate of 46 cents by 23.9%.
Including one-time pre-tax special charges, the company posted GAAP earnings of 22 cents per share compared with 76 cents generated in the year-ago-quarter.
This year-over-year decline can be attributed to COVID-19, which had an unfavorable impact on many of the company’s end markets.
Total revenues came in at $2,777 million, which missed the Zacks Consensus Estimate of $2,894 million by 4%. Moreover, the reported figure decreased 10.7% from the year-ago quarter’s $3,109 million on lower contributions from the company Aviation and Industrial segments.
Manufacturing revenues decreased 10.6% to $2,763 million, while revenues at the Finance division declined 17.7% to $14 million.
Textron Aviation: In the quarter under review, revenues at this segment dropped 23.1% to $872 million from $1,134 million in the year-ago quarter. The decline was primarily due to lower volume and mix, largely the result of lower Citation jet volume and commercial turboprop volume.
The company delivered 23 jets, down from 44 in the year-ago quarter. It also delivered 16 commercial turboprops, down from 44 in first-quarter 2019.
The segment registered profits of only $3 million in the quarter, down from $106 million in the year-ago quarter, owing to lower volume and unimpressive performance. The order backlog at the end of the quarter was $1.4 billion.
Bell: Revenues from this segment were $823 million, up 11.4% from the year-ago quarter’s $827 million, primarily due to higher military volume.
The segment delivered 15 commercial helicopters in the quarter, down from 30 last year.
Segment profits were up 10.6% to $115 million on account of higher military volume. Bell’s order backlog at the end of the quarter was $6.4 billion, down $0.5 billion sequentially.
Textron Systems: Revenues at this segment came in at $328 million, up from $307 million a year ago. The upside can be primarily attributed to higher volume in most product lines.
Segmental profits decreased 7.1% year over year to $26 million in the first quarter.
Textron Systems’ backlog at the end of the first quarter was $1.4 billion, higher than $1.2 billion at the end of the previous quarter.
Industrial: Revenues at this segment declined 18.9% to $740 million, primarily due to lower volume and mix in the Fuel Systems and Functional Components product line from manufacturing facility closures, as a result of COVID-19.
Moreover, segmental profits declined from $50 million in the first quarter of 2019 to $9 million in the first quarter of 2020 on account of lower volume and mix.
Finance: Revenues at this segment decreased to $14 million from $17 million in the year-ago quarter. Segmental profits decreased by $3 million from first-quarter 2019.
As of Apr 4, 2020, cash and cash equivalents totaled $2,263 million compared with $1,181 million as of Jan 4, 2020.
Cash outflow from operating activities amounted to $393 million at the end of first-quarter compared with cash outflow of $196 million at the end of the prior-year period.
Capital expenditures were $50 million in first-quarter 2020 compared with $59 million in first-quarter 2019.
Long-term debt was $2,956 million as of Apr 4, 2020, compared with $2,563 million as of Jan 4, 2020.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -145.83% due to these changes.
Currently, Textron has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Textron has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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