On Monday, Jefferies made an adjustment to the price target for shares of Textron (NYSE:TXT), reducing it from $105.00 to $100.00, while upholding a Buy rating on the stock. The firm's analyst cited a mix of factors influencing the decision, noting that Textron's third-quarter performance, with the exception of its Bell division, was not particularly strong, but this was broadly anticipated.
The management of Textron has revised its 2024 earnings per share (EPS) forecast downward by 13%, establishing a new range of $5.40 to $5.60. This revision includes a decrease of $0.80, attributed to setbacks in the Aviation division, where a strike caused a $0.60 reduction, and the Industrial sector, contributing a $0.30 decrease. However, these were slightly offset by a $0.10 increase from the Bell division.
In response to these developments, Jefferies has also revised its own EPS estimate for Textron in 2024, setting it at $5.55, and has made a 2% reduction to its 2025 EPS prediction, which now stands at $6.90. The revised figures reflect new expectations for the Industrial division's margins, now anticipated to be 3.9%.
The analyst's commentary highlighted the current valuation of Textron shares, which are trading at 12.4 times Jefferies' estimated EPS for 2025. This valuation represents a 41% discount to the market, compared to the historical average discount of 26% over the past three years.
In other recent news, Textron's third-quarter earnings revealed a slight increase in revenue, rising to $3.4 billion from the previous year's $3.3 billion. However, the adjusted income from continuing operations fell to $1.40 per share, down from $1.49 per share a year ago.
The company's recent financial performance has been impacted by a five-week strike at Textron Aviation operations in Wichita, Kansas, which has led to a decrease in the expected earnings per share (EPS) for Textron in 2024, now set at $5.45, a $0.80 reduction from previous estimates.
Baird, despite the strike's effects, maintained an Outperform rating on Textron shares but reduced the price target to $100 from $109. On the other hand, UBS reduced the company's price target to $79 from $87 and maintained a Sell rating on the stock. Despite these setbacks, Textron's Bell segment showcased growth with revenues increasing to $929 million, attributed to the progression of the FLRAA program.
InvestingPro Insights
Recent data from InvestingPro offers additional context to Textron's financial landscape. The company's market capitalization stands at $15.28 billion, with a P/E ratio of 18.05. This valuation metric aligns with Jefferies' observation of Textron trading at a discount to the broader market.
InvestingPro Tips highlight that Textron has maintained dividend payments for an impressive 54 consecutive years, demonstrating a strong commitment to shareholder returns. This consistency in dividend payments could be particularly appealing to investors in light of the recent downward revision in earnings forecasts.
Another relevant InvestingPro Tip indicates that management has been aggressively buying back shares. This strategy could potentially support the stock price and signal management's confidence in the company's long-term prospects, despite the recent challenges in the Aviation and Industrial divisions noted in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into Textron's financial health and market position.
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