On Monday, Textron Inc . (NYSE:TXT) received an upgrade from Vertical Research Partners, moving its stock rating from Hold to Buy, while maintaining a price target of $91.00. The upgrade comes after a year where Textron's shares faced significant pressure, ending 2024 with a 5% decline, underperforming the S&P 500 by 28%.
The firm's analyst cited valuation as a key factor for the upgrade, noting that Textron's current valuation presents an attractive entry point for investors. Despite challenges in the Industrials division, which accounts for a mere 14% of the company's projected 2025 profits, the stock's valuation appears too compelling to overlook.
With a current P/E ratio of 16.4 and EV/EBITDA of 10.2, Textron trades well below aerospace sector averages. InvestingPro's comprehensive analysis reveals additional valuation metrics and insights available to subscribers, including 8 key ProTips about the company's financial health and market position.
Vertical Research highlighted Textron's solid balance sheet, supported by InvestingPro data showing a healthy current ratio of 1.83 and moderate debt levels. The company's Debt to EBITDA ratio of 2.3x and strong liquidity position, combined with a robust backlog in its Aviation and Bell divisions, which account for approximately 80% of EBIT, demonstrate financial stability.
Management has been actively returning value to shareholders through aggressive share buybacks, while maintaining dividend payments for 54 consecutive years. The company's exploration of strategic alternatives for parts of its Specialty Vehicle business, announced towards the end of last year, is viewed as a positive step towards a more focused portfolio.
The report also pointed to the potential long-term benefits from Textron's Bell business, which was selected as the winner of the U.S. Army's Future Long-Range Assault Aircraft (FLRAA) competition at the end of 2022. This program positions Bell as the primary supplier of tactical helicopters to the Army, with the potential for significant growth as the V-280 enters full-rate production. The FLRAA program, estimated at $70 billion for the U.S. portion alone, has not yet been fully reflected in Textron's share price, according to Vertical Research, as the stock has only risen 7% since the announcement, lagging behind the S&P 500 by 37%.
In conclusion, Vertical Research Partners' optimistic outlook on Textron is based on the company's attractive valuation, strong balance sheet, and significant growth potential from its aerospace and defense segments. The firm believes that the market has not yet fully recognized the long-term value that Textron's recent developments could bring.
For detailed insights into Textron's financial health, valuation metrics, and growth prospects, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro, covering over 1,400 top US stocks.
In other recent news, Textron Inc. has experienced a series of significant financial adjustments. The company has decided to put an indefinite pause on its Powersports production due to a decrease in consumer demand. This has resulted in an increase in restructuring charges, now estimated between $190 million and $205 million.
Jefferies, a financial services company, has adjusted the price target for Textron's shares to $95.00, down from the previous target of $100.00, but has maintained a Buy rating on the stock. The firm has also revised its earnings per share (EPS) estimate for Textron in 2024 downward to $5.40, which is below the consensus estimate of $5.53. Textron's Bell segment continues to show growth, with revenues increasing to $929 million, while the Industrial revenues have seen a decline.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.