Title: Where Could Textron's Stock Head Next?
Textron's Q4 Results: A Mixed Bag
Textron (NYSE: TXT) recently reported its Q4 earnings, with revenue falling short of estimates and earnings exceeding expectations. The company reported a revenue of $3.6 billion, a 7% decrease year-over-year, due mainly to a 16% decline in its Textron Aviation segment. The adjusted earnings per share came in at $1.34, surpassing the consensus estimate of $1.25. The strike at Textron Aviation was a significant factor in the company's underperformance in Q4.
The stock saw a decline of around 6% post-results announcement but has since recovered slightly. The stock's performance has been subpar compared to the broader S&P500 index, which has shown a significant growth of 28%. If you're looking for a smoother investment ride, the High-Quality portfolio might be a suitable option, having outperformed the S&P with returns exceeding 91% since its inception.
Textron's Q4 Revenue Breakdown
Textron Aviation, which saw a 16% decline, was the primary reason for the overall revenue drop. The segment delivered only 32 jets and 38 turboprops in Q4, a significant decrease from the 50 and 40 delivered in the previous quarter. Textron Systems and Industrials segments also saw a slight decline, while the Bell segment recorded a 5% increase, thanks to higher volumes on the FLRAA program.
Textron's Future Outlook
For 2025, Textron expects a 7% increase in revenues, reaching $14.7 billion. The adjusted earnings are projected to be between $6.00 and $6.20 per share, below the street expectation of $6.39 per share. The company anticipates growth across its aerospace and defense businesses, as well as improved productivity at Textron Aviation. However, the work stoppage at Textron Aviation due to the IAM union strike has impacted aircraft deliveries.
The industrial segment also faced lower volumes due to inflationary pressures and competition from Chinese alternatives, leading to a 9.6% decline in quarterly revenue. The industry segment is undergoing strategic restructuring actions to address the demand weakness, which may have short-term negative impacts but could lead to long-term improvements.
Impact on TXT Stock
Despite the challenging quarter and future outlook, Textron's stock has been showing some resilience. At its current level around $78, the stock is trading at under 13x forward expected earnings, lower than its average P/E ratio of over 16x for the past three years.
When compared to Textron's peers, the company's stock performance is less consistent. The Trefis High-Quality Portfolio is a less volatile option, having comfortably outperformed the S&P 500 over the last four-year period.
In conclusion, Textron's outlook for 2025 is mixed, with expectations of revenue growth and improved productivity being offset by the impact of the work stoppage and demand softness in the industrial segment. The company's ability to execute its strategic plans will be crucial in achieving its revenue and EPS targets.
The Texas Instruments (TXT) revenue, not mentioned in the text, saw a decrease in Q4 as well, contributing to Textron's overall revenue valuation taking a hit. Textron's Textron Aviation segment's struggles significantly impacted its Q4 txt revenue, leading to a revenue valuation that was lower than expected.
