It has been about a month since the last earnings report for Textron (TXT). Shares have lost about 7.6% 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 its most recent earnings report in order to get a better handle on the important drivers.
Textron’s Q1 Earnings Beat, Revenues Miss Estimates
Textron reported first-quarter 2019 earnings from continuing operations of 76 cents per share, which surpassed the Zacks Consensus Estimate of 70 cents by 8.6%. The bottom line also increased 5.6% from 72 cents in the year-ago quarter.
This year-over-year upside can be attributed to lower number of outstanding shares of the company in the reported quarter.
Total revenues in the quarter under review totaled $3,109 million, which fell short of the Zacks Consensus Estimate of $3,216 million by 3.3%. The reported figure also declined 5.7% from the year-ago figure of $3,296 million on lower contribution from all major segments, except the Textron Aviation unit.
Manufacturing revenues decreased 5.7% to $3,092 million, while revenues at the Finance division increased 6.3% to $17 million.
Textron Aviation: In the quarter under review, revenues at this segment improved 12.3% to $1,134 million from $1,010 million in the year-ago quarter. The upside can be attributed to higher volume and mix across the jet and commercial turboprop product lines.
The company delivered 44 jets, up from 36 last year and 44 commercial turboprops, up from 29 in 2018’s first quarter.
The segment registered profits of $106 million in the first quarter, up from $72 million in the year-ago quarter owing to higher volume and favorable performance. Order backlog at the end of the quarter was $2 billion, slightly up from the prior quarter’s $1.8 billion.
Bell: Revenues from this segment summed $739 million, down 1.7% from the year-ago level of $752 million. Lower commercial volume led to the downside.
Segment profits were up by 19.5% to $104 million. Bell’s order backlog at the end of the quarter was $6.3 billion, up $0.5 billion from the preceding quarter number.
Textron Systems: Revenues at this segment came in at $307 million, down from $387 million a year ago. The downside can be attributed to lower TAPV deliveries at Textron Marine & Land Systems and lower Unmanned Systems volume.
Additionally, segmental profits decreased to $28 million from $50 million on lower volume and lower net favorable program adjustments.
Textron Systems’ backlog at the end of the first quarter summed $1.4 billion, almost in line with the figure at the end of the fourth quarter of 2018.
Industrial: Revenues at this segment fell 19.4% to $912 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 $14 million.
Finance: Revenues at this segment improved 6.3% to $17 million from $16 million in the year-ago quarter. Segmental profits, however, remained flat at $6 million.
As of Mar 30, 2019, cash and cash equivalents totaled $646 million compared with $987 million as of Dec 29, 2018.
Cash outflow from operating activities amounted to $196 million at the end of first quarter of 2019 compared with $53 million at the end of prior-year period.
Capital expenditures were $59 million compared with $77 million in the prior year.
Long-term debt was $2,812 million as of Mar 30, 2019, compared with $2,808 million as of Dec 29, 2018.
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. The Zacks Consensus Estimate for the company’s current-year earnings is $3.67, which lies just above the midpoint of the company’s guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Textron has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 C. 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 these revisions 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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