Textron (TXT) Misses On Earnings In Q4, Issues '18 Guidance

Textron Inc. (NYSE:TXT) reported fourth-quarter 2017 adjusted earnings from continuing operations of 74 cents per share, which missed the Zacks Consensus Estimate of 77 cents by 4.1%. Adjusted earnings were down 7.5% from 80 cents in the year-ago quarter.

Excluding one-time items, the diversified U.S. conglomerate reported loss of 40 cents per share, compared to the year-ago quarter’s earnings of 78 cents.

For 2017, the company posted adjusted earnings of $2.45 per share, which again missed the Zacks Consensus Estimate of $2.48. Year over year, the adjusted earnings figure reflected 6.5% decline.

Revenues

Total revenues in the quarter were $4,017 million, lagging the Zacks Consensus Estimate of $4,040 million by 0.6%. Reported revenues however, improved approximately 5% from the year-ago figure of $3,825 million on higher contribution from Bell and Industrial segments.

Manufacturing revenues were up 5.1% to $4,002 million, while revenues at the Finance division declined 16.7% to $15 million.

For 2017, the company generated revenues of $14.20 billion, which again missed the Zacks Consensus Estimate of $14.24 billion. Year over year, the top line figure reflected 3% improvement.

Segment Performance

Textron Aviation: Revenues during the quarter fell 3.2% to $1,391 million from $1,436 million in the year-ago quarter due to lower military volumes.

The company delivered 58 new Citation jets, flat with last year’s number, 2 Beechcraft T-6 trainers and 31 King Air turboprops compared with 8 and 28, respectively, in the prior-year quarter.

The segment registered profits of $120 million in the fourth quarter, down from $135 million in the year-ago quarter due to higher research and development expenses. Order backlog at the end of the quarter under review was $1.2 billion, up by $15 million sequentially.

Bell: Segment revenues were $983 million, up 11% from the year-ago level of $887 million on higher military volumes, partially offset by lower commercial volumes.

Segment profits were down by $12 million to $114 million, primarily related to a change in commercial mix. Bell’s order backlog at the end of the quarter was $4.6 billion, down by $407 million from the preceding quarter.

Textron Systems: Revenues during the quarter came in at $489 million, down from $532 million a year ago, mainly because of lower volumes of Weapons and Sensors.

Segmental profits declined to $37 million from $53 million.

Textron Systems’ backlog at the end of the quarter was $1.4 billion, down by $67 million from the end of the third quarter of 2017.

Industrial: Segmental revenues grew 20% to $1,100 million primarily driven by the Arctic Cat acquisition.

Segmental profits were up by $10 million from the fourth quarter of 2016.

Finance: Finance segment revenues declined by $3 million to $15 million while profits increased by $2 million.

Textron Inc. Price, Consensus and EPS Surprise

As of Dec 31, 2017, cash and cash equivalents were $1,079 million compared with $1,137 million as of Dec 31, 2016.

Cash flow from operating activities totaled $947 million at the end of 2017, compared to $988 million in the prior-year quarter.

Capital expenditure during 2017 was $423 million compared with $446 million at the 2016-end.

Long-term debt was $3,074 million as of Dec 31, 2017, up from $2,414 million as of Dec 31, 2016.

Guidance

Textron has provided its guidance for 2018. The company expects earnings per share from continuing operations in the range of $2.95-$3.15 on revenues of $14.6 billion.

The company expects its net cash provided by operating activities of continuing operations of the manufacturing group to be between $1,170 – $1,270 million, during 2018.

Zacks Rank

Textron carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Peer Releases

Northrop Grumman (NYSE:NOC) reported fourth-quarter 2017 earnings of $2.82 per share, beating the Zacks Consensus Estimate of $2.75 by 2.5%.

Raytheon Company (NYSE:RTN) reported fourth-quarter 2017 adjusted earnings from continuing operations of $2.03 per share, surpassing the Zacks Consensus Estimate of $2.02 by 0.5%.

General Dynamics (NYSE:GD) reported fourth-quarter 2017 earnings from continuing operations of $2.50 per share, beating the Zacks Consensus Estimate of $2.37 by 5.5%. Reported earnings were up 6.8% from $2.36 in the year-ago quarter.

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